Method and system for computer-based auctioning of basic generation services

ABSTRACT

A system for conducting a computer-based, simultaneous, multiple round, descending clock auction for basic generation services includes a web server for receiving bid data for one or more users for basic generation service products, an application server host application software, which processes the one or more bids according to at least one auction rule, tracks the auction, monitors the auction, and/or determines when to end the auction, and a database server, which stores auction data. A method of conducting a computer-based, simultaneous, multiple round, descending clock auction for basic generation services includes the repeating steps of receiving bids indicating desired tranche units of basic generation service products, calculating next round prices for each product, and sending round results to bidders. The subsequent round price for each of the products and a notice of the number of tranches bid during the immediately previous round of bidding for each of the products and/or the amount of excess supply offered. When the number of tranches bid for the round of bidding are equal to or less than the certain threshold for each of the products such that no further bidding can take place under the auction rules, the auction ends after the round of bidding and awarding winning bidders an ending price for each of the at least one of the plurality of products won by the winning bidders.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a divisional of U.S. patent application Ser. No.10/680,407 filed Oct. 8, 2003, now U.S. Pat. No. 7,409,360 issued Aug.5, 2008, which is related to and claims the priority of U.S. ProvisionalApplication Ser. No. 60/416,570 filed Oct. 8, 2002, each of which areincorporated herein by reference.

FIELD OF THE INVENTION

The present invention is directed to computer-related and/or assistedsystems, methods, and computer program devices for conducting auctions.More particularly, it relates to methods and systems, for example, forconducting a simultaneous, multiple round, descending clock auction.

BACKGROUND OF THE RELATED ART

Various methods of computer-based auctioning have been suggested, theprior art status of which is not being admitted herein. U.S. Pat. No.6,026,383 (Ausubel), incorporated herein by reference, discloses anautomated system for conducting an auction comprising a plurality of bidentry terminal and a bidding information processor communicativelycoupled to the bid entry terminals. Bidders at the bid entry terminalsobserve displayed information and enter bids accordingly. The biddinginformation processor and the bid entry terminals communicate andprocess information in order to conduct an auction. The method involvesconducting an auction in which the price paid by bidders is independentof their own bids, in which participants are provided with informationconcerning their competitors' bids as the auction progresses, and inwhich the confidentiality of high values is maintained.

According to Ausubel, an auction proceeds as follows: First, theauctioneer determines a starting price and announces it to the bidders.Each bidder responds with a bid indicating how many objects each wishesto purchase at the current price. Typically, the total number of objectsdesired by all the bidders is greater than the number of objects whichare available. In this case, the auctioneer determines whether any ofthe objects should be assigned to any bidders in this round. This isdone by determining for each bidder, sequentially, whether the sum ofthe bids of all the other bidders is less than the number of objectsavailable. In other words, is there is at least one object which isdesired by only one bidder? Those objects are then assigned to thatbidder, obligating that bidder to purchase them at the price standing atthat time. If any objects remain available, the auctioneer announces anew price and the auction continues.

In FIG. 1 a, process 100 starts with step 102, in which memory locationsin a data partition of memory of a bid information processor (“BIP”) areinitialized. In step 102, the appropriate memory locations areinitialized with information such as the number of objects available andthe initial price for the auction. In step 104, information regardingthe bidding process is transmitted from the BIP to bid entry terminals(“BETs”). The BETs receive the information and display it to thebidders. The transmitted information may include the current lot number,the current round number, the current price for the current round, thebidder number of the bidder at each respective bid entry terminal, thebid history prior to the current round, auction announcements andmessages for the current round, constraints on the bid which the biddermay submit in the current round and passwords or other securityinformation.

The bid history is information relating to the bids submitted by biddersin prior rounds. For example: 1) the desegregated quantities demanded byeach bidder in prior rounds, where each bidder is identified by name orby a confidential bidder identification number; 2) the aggregatequantity demanded by all bidders in prior rounds; 3) the number ofobjects remaining to be sold; and 4) the bidder's own obligations whichhave been determined thus far.

The auction announcements and messages include other information whichis provided to bidders, for example: 1) whether the auction is stillopen or whether it has concluded; 2) the deadline by which the next bidmust be submitted by bid entry terminals; 3) the schedule for upcomingrounds of the auction; 4) information concerning the required substanceof bids, for example, whether the quantity each bidder demands isrequired to be no greater than the quantity the same bidder demanded inthe previous round; and 5) other ad hoc announcements or messages whichthe BID would like to convey to the BETs.

In step 106, the BETs receive bids from the participating bidders andtransmit them to the BIP. The transmitted information may include thecurrent lot number, the current round number, the current price for thecurrent round, the bidder number of the bidder at each respective BET,the quantity which the bidder demands in the current round, and anypasswords or other security information. In step 108, the BIP receivesthe information transmitted from the BETs and send a confirmationmessage. In step 110, if the auction rules allow, the BETs may receivecorrections to the bids or withdrawals of bids from the bidders andtransmit these corrections or withdrawals to the BIP.

In step 112, the BIP closes the bidding for the current round andprocesses the bids received from each of the BETs. In step 114, the BIPdetermines whether any available objects remain. If so, the process goesto step 116, in which the BIP increments the current price informationand generates the bidding history and generates the bidding history andany auction announcements and messages. The process then loops to step104. If no available objects remain, the process ends.

FIG. 1 b is a flow diagram of a subprocess of step 112. It begins withstep 112-1, in which the BIP sums the associated quantities demanded byall the BETs. In step 112-2, the BIP determines whether the sum is morethan the current number of available objects. If the sum is more thanthe current number of available objects, the process continues with step112-3, in which the BIP considers each bidder in turn and assignsobjects to any winning bidders. If the sum is not more than the currentnumber of available objects, the BIP proceeds to step 112-4, in which,if the sum of the quantities demanded by all bidders exactly equals thecurrent number of available objects, then each bidder is assigned thedemanded quantity at the current price, and the auction ends. If the sumof the quantities demanded by all bidders is less than the currentnumber of available objects, then each bidder is assigned the demandedquantity at the current price, and the residual quantity is assigned tobidders according to their demands in the previous period and theauction ends.

PCT Application No. WO 02/097582 A2 (Ausubel et al.), incorporatedherein by reference, discloses a system and method for acomputer-implemented auction in which multiple types of items areauctioned together without imposing a particular division of supply ordemand amount the individual items. The method of Ausubel et al. can beused for reverse auctions, which typically involved descending prices.Bids may consist of the quantity of each respective type of item thatthe bidder wishes to transact at a current price vector.

The clock auction of FIG. 2 starts with step 202, in which memorylocations of a computer are initialized with information such as thetypes of items in the auction and the available quantity of each type ofitem. In step 204, a computer establishes the initial prices. In step206, a computer outputs auction information, including the current pricevector. The bidder terminals then receive the auction informationthrough their network interfaces and display the information to biddersthrough their user interfaces. In step 208, a computer receives bidsfrom bidders. The bidding information processor then receives the bidsthrough its network interface. In step 210, a computer appliesconstraints, if any, to the received bids, and enters only those bidsthat satisfy said constraints. In step 212, a computer process thereceived bids and determines whether the auction should continue. If theauction should continue, the process goes to step 214, in which acomputer establishes an updated price vector. Then, at step 216, acomputer updates other auction information, if any.

If the auction should not continue, the process goes to step 218, inwhich a computer outputs a final message, including the allocation ofitems among bidders and payments of the bidders. The bidding informationprocessor takes the allocations of items among bidders to be their finalbids and takes the payment of each bidder to be the dot product of thefinal price vector and the bidder's final quantity vector.

Previous computer-based auction methods have also been suggestedparticularly for energy supply auctions. U.S. Pat. No. 6,047,274 ('274),incorporated herein by reference, and U.S. Pat. No. 6,598,029 ('029),also incorporated herein by reference, are both to Johnson et al. andhave substantially similar disclosures.

The '274 and '029 patents disclose an auction service for energy supplyin which a bidding moderator (“Moderator”) receives bids from competingsuppliers of the rate each is willing to charge to particular end usersfor estimated quantities of electric power (or gas) supply. Eachsupplier receives competing bids from the Moderator and has theopportunity to adjust its own bids down or up, depending on whether itwants to encourage or discourage additional energy delivery commitmentsin a particular geographic area or to a particular customer group. Eachsupplier's bids can also be changed to reflect each supplier's capacityutilization.

FIG. 3 a illustrates an auction process in which a Moderator 301administers the collection and dissemination of bidding information. TheModerator 301 includes a computer with a processor and memory, togetherwith input and output devices to communicate with the Providers' energymanagement computers 302, which are the source of the biddinginformation. By means of these systems, the Providers bid to become theselected Provider of electric power or natural gas for an end user orgroup of end users. The Providers transmit their bids from their energymanagement computers 302 over data links 303, which may be either analog(using modems) or digital. Each Provider has an energy managementadministrator who enters energy management instructions into each energymanagement computer 302 through an input port 304 by means, for example,of a keyboard or a data link from a remote site or local computer.

The Moderator 301 receives the bids, processes them in its biddingprocessor 305 to produce provider selection data, and enters both into adatabase in its memory by means of the data buses and registers internalto a computer. The bids are sorted according to delivery destinationwithin the respective service areas of the end user's local energydistribution companies (“DISCOs”) for subscribing end users. TheModerator 301 processes the bids to prioritize them for each deliverydestination, producing derivative data, including provider selectiondata. This data reflects designation of a selected Provider andalternate Providers, based on the Providers' bids to supply the powerrequirements of each end user or group of end users. The Moderator alsodesignates a default Provider in the event the Provider selected by thebidding process has no additional capacity available. The Moderator 301transmits the derivative data over a data link 307 to a control computer308 associated with the end user or set of end users for which thesubmitted bids are applicable.

The control computer 308 applies decision rules, formulated and inputtedby the control computer's administrator (e.g., the energy manager for avery large end user), to the derivative data received from the Moderator301 in order to select a Provider. A control computer may be operated bythe end user, the end user's DISCO, or the Moderator (on behalf of theend users associated with that control computer). The Moderator alsoperforms all the functions that the control computer would otherwiseperform, including the selection of a Provider offering the lowest rate(or best economic incentive) at that time to each such end user.

Each of the Providers transmits to the Moderator the rate it is willingto charge (or other economic incentive it is willing to offer) forelectric power to be provided to an end user or group of end users, oversome particular period of time. The Provider may change its bids asoften as it likes as market place demands for energy change or inresponse to competitors' bidding activities. The Moderator collects thisbid information from all the Providers, sorts it according to the rulesof the auction, and further processes this bid information to selectProviders for particular end users. This provider selection informationincludes a prioritization of the Provider selection in accordance withProviders' bids or the designation of a selected Provider or defaultProvider. The Moderator gives each Provider bid information from otherProviders for at least a portion of the end users in regard to which anyProvider has submitted a bid.

From the list of all Providers providing bid information to theModerator, each control computer (or the Moderator) selects thoseProviders from whom participating end users will be provided electricpower. After each new bid is submitted by a Provider and is processed bythe Moderator, the rate and/or provider selection data is transmitted tothe relevant control computers and rate information is distributed tothe Providers in order to implement the auction. All Providers have theopportunity thereafter to submit a lower or higher bid for any end useror group of end users to whom they wish to supply electric power.

As illustrated in FIG. 3 a, once the control computer 308 selects aProvider for an end user or set of end users, it transmits anotification of that selection to the Moderator via data link 307, orperhaps via data bus if the control computer is being operated by theModerator 301. The Moderator 301 then transmits via data link 303 aselection notification to the selected Provider 302 and a specificationof the estimated energy requirements of the end user or set of end usersto be served. The Moderator also transmits via data link 309 a copy ofsuch selection notification to the DISCO 310 serving the end user orapplicable set of end users. Applying the actual energy usage datareceived from each end user's meter and the rate offered at the time bythe winning bidder, the Moderator prepares and transmits a billingstatement for each end user to the respective Provider and end user.

FIG. 3 b illustrates a method in which Providers formulate bids andtransmit these bids 328 to the Moderator. Upon receiving such bids 329,the Moderator processes the bids to determine which bids apply to whichset of end users associated with each control computer 330, prioritizesthe bids by listing the lowest bid first (and then the next lowest andso on) and generates provider selection data 331. The Moderator thentransmits 332 rate information and/or provider selection data to eachapplicable control computer. After some initial processing of the bidsreceived, the Moderator also transmits 333 at least a portion of thereceived bid information to competing Providers.

The control computer receives from the Moderator the rate informationand/or provider selection data, applies decision rules that the controlcomputer administrator has inputted, and selects 334 a Provider for eachset of end users this control computer serves. The control computertransmits 335 to the Moderator a notification identifying the Providerthat has been selected, together with a specification of the estimatedenergy requirements for the set of end users this Provider will supply.The Moderator, in turn, will transmit 336 this information to a computer337 associated with the selected Provider's energy network managementcomputer and/or billing computer 338 of the DISCO that serves as thelocal energy distribution company for the set of end users to besupplied by the selected Provider.

As detailed in the description above, there are several, significantdifferences between the systems and methods disclosed in the Johnson etal. references and the system and method of auctioning basic generationservices of present invention. For example, the Johnson et al.references disclose the transmission (or receipt) of “economic incentivedata.” According to the specifications of the Johnson et al. references,this limitation clearly requires the transmission (or receipt) of energyrates (i.e., the monetary charge for supplying a unit of energy), pricesor credits for purposes of determining a winning bid. Moreover, theJohnson et al. references also disclose “prioritizing” of the bidsreceived from the energy providers. Bids are sorted according to bidamount.

The Johnson et al. references also disclose the generation andutilization of “derivative data.” According to the specification of theJohnson et al. references, “derivative data” is produced by processingor, in other words prioritizing, the economic incentive data. Thederivative data is produced via the manipulation or transformation ofraw bid data (i.e., economic incentive data) received from theproviders. The Johnson et al. references also disclose “first end userset data.” According to the Johnson et al. references, the “first enduser set data” consists of “economic incentive data” and “derivativedata.” The Johnson et al. references additionally disclose that theprovider is selected by processing first end user set data.

The Johnson et al. references also disclose the sharing of economicincentive data submitted by one energy provider (or data derivedtherefrom) with other energy providers to incent other providers toadjust their own bids. An energy provider may change its bid accordingto the bids or other providers as often as it likes.

Regarding the end of the auction process, the Johnson et al. referencesdisclose that an energy provider is selected according to the lowest bidamount, the bid amount being the derived from the economic incentivedata submitted by the energy provider as a bid.

Furthermore, the Johnson et al. references disclose such features astransmitting a selection notification to an energy provider andtransmitting a copy of the selection notification to a local energydistribution company. The Johnson et al. references also disclosetransmission of a specification of energy requirements a provider shouldbe expected to provide to an energy provider, providing the energyproviders with the amount of energy the provider will be expected toprovide upon winning the auction before the auction begins. The Johnsonet al. references also disclose periodic usage reports for reportingenergy usage to be transmitted from a local energy company to an energyprovider. The periodic usage reports are created from actual usage datafrom end users' meters.

Additional, the Johnson et al. references disclose facilitating forwarddelivery transactions, in which a buyer and seller agree to the terms ofa transaction but schedule the delivery for a future time. In order tofacilitate the forward delivery transactions, the buyer (i.e., end usersor resellers acting as buyers) transmit supply requests to the Moderatorwith sufficient information to process the request, before the beginningof the auction.

Neither the Ausubel, the Ausubel et al., nor the Johnson et al.references disclose a system and method for computer-based auctioningin, for example, simultaneous, multiple round, descending clock auctionformat that both ensure a single end price for all portions of a similarproduct that reflects market trends while still allowing bidders to exitthe auction before the end of the auction. These prior art referencesalso fail to show or suggest other features of the present invention.

SUMMARY OF THE INVENTION

It is one feature and advantage of the present invention to provide amethod and system for auctioning of basic generation services thatensures that prices for the basic generation services reflect marketsignals.

It is another optional feature and advantage of the present invention toprovide a method and system for auctioning of basic generation servicesthat ensures that all portions of a product sell for a uniform price.

It is another optional feature and advantage of the present invention toprovide a method and system for auctioning of basic generation servicesthat lowers the cost of bidder participation and lowers the cost for anAuction Manager.

It is another optional feature and advantage of the present invention toprovide a method and system for auctioning of basic generation servicesthat reduces the possibility of strategic participation in one auctionbut not another that could lead to higher procurement costs.

It is another optional feature and advantage of the present invention toprovide a method and system for auctioning of basic generation servicesthat improves the match of supplier and product.

These and other features and advantages of the present invention areachieved in a system for conducting a computer-based, simultaneous,multiple round, descending clock auction for basic generation services.The system includes a web server for receiving bid data from one or moreusers. The bid data comprises one or more bids one or more products, thebid data indicating a number of desired tranches for each product. Aproduct is the basic generation service load of an electric distributioncompany for a given period or time or term. A single tranche representsan equal portion of the electric distribution company's basic generationservice load. The system also includes an application server. Theapplication server host application software, which processes the one ormore bids according to at least one auction rule, tracks the auction,monitors the auction, and/or determines when to end the auction. Thesystem further includes a database server, which stores auction data.

In another embodiment of the invention, the system also includes one ormore client browsers, which enable users to submit the bid data to theweb server.

In another embodiment of the invention, the system further includes awide-area network, which enables communication between the clientbrowsers and the web server.

In another embodiment of the invention, the web server and theapplication server are integrated into a single server.

In another embodiment of the invention, the web server and theapplication server are maintained on separate servers.

In another embodiment of the invention, the auction data stored by thedatabase server includes user data obtained through an auctionapplication and a qualification process and information regarding theproducts. The information includes a target auction volume for theauction, a tranche target for each product, and/or a load cap that maybe specified for each of the products or for all products together.

In another embodiment of the invention, the Auction Manager can revisethe target auction volume that is stored in the database server.

In another embodiment of the invention, the system further includes asystem login computer, which logs all hits to the web server and/or theapplication server.

In another embodiment of the invention, the system also includes aback-up server, which provides back-up support and maintenance for theweb server, the application server, and/or the database server.

In another embodiment, a system conducts a computer-based, simultaneous,multiple round, descending clock auction for basic generation services.The system includes a web server for receiving bid data from one or moreusers. The bid data comprises one or more bids for one or more productsduring multiple rounds of bidding, the bid data indicating a number ofdesired tranches for each product. A product is the basic generationservice load of an electric distribution company for a given period ortime or term. A single tranche represents an equal portion of theelectric distribution company's basic generation service load.

The system also includes an application server. The application serverhost application software calculates a second round price for each ofproducts for a second round of bidding based on the specified startingprice and a number of tranches bid for each of the products during afirst round of bidding. The second round price is lower than thespecified starting price for any of the products that received a numberof tranches bid greater than a tranche target for that product duringthe first round of bidding. The second round price is equal to thespecified starting price for any of the products that received a numberof tranches bid one of equal to and less than the tranche target forthat product during the first round of bidding. The application softwarealso sends a first round result of the first round of bidding toqualified bidders. The first round result includes the second roundprice for each of the products and a notice of the number of tranchesbid during the first round for each product and/or another measure ofbidding activity such as excess supply.

The application software repeats the steps of calculating round pricesand sending round results for one or more subsequent rounds of biddingfollowing the second round. A subsequent round price for each of theproducts for the one or more subsequent rounds of bidding is based on aprevious round price of an immediately previous round of bidding and anumber of tranches bid for each of the at least one of the plurality ofproducts during the immediately previous round of bidding. Thesubsequent round price is lower than the previous round price for any ofthe products that received a number of tranches bid greater than atranche target for that product during the immediately previous round ofbidding. The subsequent round price is equal to the previous round pricefor any of the products that received a number of tranches bid one ofequal to and less than the tranche target for that product during theimmediately previous round of bidding. The round results include thesubsequent round price for each of the products and a notice of thenumber of tranches bid during the immediately previous round of biddingfor each of the products. The round results also optionally includeanother measure of bidding activity such as the amount of excess supplyoffered.

The application software also determines when the number of tranches bidduring a round of bidding are one of equal to and less than the tranchetarget for each of the products, and, when the number of tranches bidfor the round of bidding are one of equal to and less than a certainthreshold for each of the at least one of the plurality of products suchthat no further bidding can take place under the auction rules, ends theauction after the round of bidding and awarding winning bidders anending price for each of the products won by the winning bidders.

The system further includes a database server, which stores auctiondata. A maximum number of tranches bid which is capable of being made bya single one of the qualified bidders for a particular product is equalto or less than a load cap for that particular product.

During one of the second round and subsequent rounds of bidding,receiving bids further includes receiving, from at least one of thequalified bidders, at least one of a withdrawal request and a switchrequest. The withdrawal request indicates a desire of the qualifiedbidder making the withdrawal request to remove a first indicated numberof tranches from one or more particular products and to reduce a maximumnumber bids that the qualified bidder is capable of making in futurerounds of the auction. A switch request indicates a desire of thequalified bidders making the switch request to switch a second indicatednumber of tranches from one of the products to one or more differentproducts. The ending price for each of the products is a final pricefrom a final round of bidding, a named exit price, a price at whichretained withdrawn bids were last freely bid, or a price at which deniedswitched bids were last freely bid, depending on the bids needed to justfill the tranche target.

In another embodiment, a method conducts a computer-based, simultaneous,multiple round, descending clock auction for basic generation services.The method includes the sequential, non-sequential, andsequence-independent steps of receiving electronic bids from bidders forone or more products, the electronic bids indicating a number of desiredtranches for each product. Each of the products is a basic generationservice load of an electric distribution company. A tranche representsan equal portion of the electric distribution company's basic generationservice load. The method also includes processing the electronic bidsaccording to at least one auction rule using auction software andsending an auction result to the bidders. The auction result includescurrent prices of the products, a current number of tranches bid foreach of the products, and/or winning bidders for each of the products.

In another embodiment of the invention, the method further includesstoring, before and/or during, bidder data obtained from the biddersthrough an auction application and qualification process and informationregarding the products. The information includes at least one of atranche target and a load cap for each of the at least one of theplurality of products.

In another embodiment of the invention, the method also includesretrieving, during the auction, the bidder data and the informationregarding the at least one of the plurality of products.

In another embodiment of the invention, the method further includessubmitting the electronic bids, over a wide-area network from thebidders, each of the bidders using a client browser.

In another embodiment of the invention, the step of submitting theelectronic bids further includes sending a webpage to the clientbrowser, which is used by the each of the a bidders to format and submitthe electronic bids.

In another embodiment of the invention, since the auction proceeds inmultiple rounds, the step of processing the electronic bids furthercomprising calculating the current prices of the at least one tranche ofthe at least one of the plurality of products for each of the multiplerounds.

In another embodiment, a method conducts a computer-based, simultaneous,multiple round, descending clock auction for basic generation services.The method includes the sequential, non-sequential, andsequence-independent steps of receiving electronic bids from qualifiedbidders indicating one or more desired tranches of one or more productsat a specified starting price set by an Auction Manager for each of theat least one of the plurality of products during a first round ofbidding. Each of the products comprises a basic generation service loadof an electric distribution company. The one or more tranches representsan equal portion of the electric distribution company's basic generationservice load.

The method also optionally includes calculating a second round price foreach of the products for a second round of bidding based on thespecified starting price and a number of tranches bid for each of the atleast one of the plurality of products during the first round. Thesecond round price is lower than the specified starting price for any ofthe at least one of the plurality of products that received a number oftranches bid greater than a tranche target for that product during thefirst round of bidding. The second round price is equal to the specifiedstarting price for any of the at least one of the plurality of productsthat received a number of tranches bid one of equal to and less than thetranche target for that product during the first round of bidding.

The method further optionally includes sending a first round result ofthe first round of bidding to the qualified bidders. The first roundresult includes the second round price for each of the products and anotice of the number of tranches bid during the first round for each ofthe products and/or another measure of bidding activity such as excesssupply. The method also includes receiving bids for one or more tranchesof the products from the qualified bidders at the second round priceduring the second round of bidding.

The method further optionally includes repeating the steps of receivingbids, calculating next round prices and sending round results for one ormore subsequent rounds of bidding following the second round. Asubsequent round price for each of the products for the subsequentrounds of bidding is based on a previous round price of an immediatelyprevious round of bidding and a number of tranches bid for each of theproducts during the immediately previous round of bidding. Thesubsequent round price is lower than the previous round price for any ofthe products that received a number of tranches bid greater than atranche target for that product during the immediately previous round ofbidding. The subsequent round price is equal to the previous round pricefor any of the at least one of the plurality of products that received anumber of tranches bid one of equal to and less than the tranche targetfor that product during the immediately previous round of bidding. Theround results include the subsequent round price for each of theproducts and a notice of the number of tranches bid during theimmediately previous round of bidding for each of the products. Theround results also optionally include another measure of biddingactivity such as the amount of excess supply offered.

The method also optionally includes determining when the number oftranches bid during a round of bidding are equal to or less than thetranche target for each of the at least one of the plurality of productsand, when the number of tranches bid for the round of bidding are equalto or less than the certain threshold for each of the products such thatno further bidding can take place under the auction rules, ending theauction after the round of bidding and awarding winning bidders anending price for each of the at least one of the plurality of productswon by the winning bidders.

In another embodiment of the invention, the bidders are qualified duringa pre-auction qualification process.

In another embodiment of the invention, the specified starting price iswithin a range of a maximum starting price and a minimum starting pricefor each of the products, which are announced before the start of theauction. In another embodiment, the specified starting price for theproducts are different from the specified starting price of the otherproducts.

In another embodiment of the invention, the one or more tranches thatare submitted by the bidders are from a single product. In anotherembodiment, the one or more tranches are from different products.

In another embodiment of the invention, a maximum number of tranches bidwhich is capable of being made by a single one of the qualified biddersis equal to or less than a bidding eligibility of the qualified bidder.In another embodiment, the bidding eligibility for the first round ofbidding is equal to an initial number of tranches for which thequalified bidder applied before the auction started. In an alternateembodiment of the invention, the bidding eligibility for subsequentrounds of bidding is equal to a total number of tranches bid placed bythe qualified bidder during the immediately previous round of bidding.

In another embodiment of the invention, a maximum number of tranches bidwhich is capable of being made by a single qualified bidder for aparticular product is equal to or less than a load cap for thatparticular product.

In another embodiment of the invention, a duration of the round ofbidding is extended when a qualified bidder submits an extension requestbefore a bidding phase of the round of bidding has ended or isautomatically granted an extension. During the extension, all of thequalified bidders are capable of submitting new bids, and a number ofextensions remaining for the qualified bidders who submitted requests isdecremented.

In another embodiment of the invention, the notice of the number oftranches bid and/or of the excess supply bid on the various products,which is reported in a round result, is a total number of tranchesavailable in the auction or a range of numbers, the range having betweenfive and ten integers. An exact number of tranches bid submitted duringan immediately previous round falls within the range of numbers, and thelargest integer of the range of numbers is divisible by five.

In another embodiment of the invention, during one of the second roundand subsequent rounds of bidding, the step of receiving bids furtherincludes receiving, from one or more of the qualified bidders, awithdrawal requests and/or a switch request. The withdrawal requestindicates a desire of the qualified bidders making the withdrawalrequest to remove a first indicated number of tranches from one or moreparticular product and to reduce a maximum number bids that thequalified bidder making the withdrawal request is capable of making infuture rounds of the auction. A switch request indicates a desire of thequalified bidder making the switch request to switch a second indicatednumber of tranches from one or more of the products to one or moredifferent products.

In another embodiment of the invention, the one or more qualified biddernames an exit price for the first indicated number of tranches in thewithdrawal request or abstains from naming an exit price for the firstindicated number of tranches in the withdrawal request. In anotherembodiment, when the exit price is named, the same exit price is namedfor all bids that are request for withdrawal from a given product.

In another embodiment of the invention, the withdrawal request is atleast partially refused for a refused number of tranches when acceptingthe withdrawal request in full would cause the number of tranches bidfor the particular product from which the bid would be withdrawn to fallbelow the tranche target for that product. One or more of the refusednumber of tranches is retained on the product on which the refusednumber of tranches was bid. The refused number of tranches is reportedto the qualified bidder.

In another embodiment of the invention, when the qualified bidder namesan exit price, the refused number of tranches for which withdrawal isrefused is retained on the at least one of the plurality of products onwhich the refused number of tranches was bid at a price equal to thenamed exit price.

In another embodiment of the invention, when the bidder abstains fromnaming an exit price, the refused number of tranches for whichwithdrawal is refused is retained on the at least one of the pluralityof products on which the refused number of tranches was bid at a priceequal to a price of a last round during which the refused number oftranches was freely bid before the withdrawal request was made.

In another embodiment of the invention, a bidder eligibility of thequalified bidder making the withdrawal request is lowered by the firstindicated number of tranches even when the withdrawal request isrefused.

In another embodiment of the invention, when, if at least two qualifiedbidders make withdrawal requests and named an exit price and thewithdrawal requests are refused, bids of a bidder having a lower namedexit price is retained first. In an alternate embodiment, when the atleast two qualified bidders name an identical exit price, earlierconfirmed bids in the round of bidding are retained or a decision onwhich tranches to retain are made on a random, tranche by tranche basis.

In another embodiment of the invention, the refused number of tranchesretained on the product are released and allowed to be withdrawn duringa first subsequent round during which a sufficient number of new bidsare entered for the product such that a total number of tranches bid forthat product for the first subsequent round is equal to or greater thanthe tranche target for that product. The release of the retained bids isreported to the qualified bidder making the withdrawal request.

In another embodiment of the invention, the switch request is at leastpartially refused for a refused number of tranches when accepting theswitch request in full would cause the number of tranches bid for theproduct from which the bid would be switched to fall below the tranchetarget for that product. The refused number of tranches is retained onthe at least one of the plurality of products on which the refusednumber of tranches was bid. The number of refused bids is reported tothe qualified bidder making the switch request.

In another embodiment of the invention, the refused number of tranchesor which switching is refused is retained on the product on which therefused number of tranches was bid at a price equal to a price of a lastround during which the refused number of tranches was freely bid beforethe switching request was made.

In another embodiment of the invention, the refused number of tranchesretained on the product is released and allowed to be switched during afirst subsequent round during which a sufficient number of new bids areentered for the product such that a total number of tranches bid forthat product for the first subsequent round is equal to or greater thanthe tranche target for that product. The release of the retained bids isreported to the qualified bidder making the switch request.

In another embodiment of the invention, the released bids from theswitch request are deemed to be bid for the products from which theywere released at a bidding price for the product for the firstsubsequent round of bidding after the bids are released.

In another embodiment of the invention, if the switching request is madeto switch the second indicated number of tranches into at least twodifferent ones of the at least one of the plurality of products, the atleast one bidder specifies a switching priority. The switching priorityindicates a preference among the at least two different ones of the atleast one of the plurality of products into which the at least onebidder desires to switch.

In another embodiment of the invention, when both a withdrawal requestand a switching request are made for a particular product, and thewithdrawal request and the switching request are both at least partiallyrefused for a refused number of withdrawn bids and a refused number ofswitched bids because accepting the withdrawal request and the switchingrequest would cause a total number of tranches bid for the particularproduct to fall below the tranche target for that particular product,the refused number of withdrawn bids is retained first. The refusednumber of switched bids is retained when retaining the refused number ofwithdrawn bids still fails to raise the total number of tranches bid toat least equal the tranche target.

In another embodiment of the invention, the ending price for each of theproducts is a final price from a final round of bidding, a named exitprice, a price at which retained withdrawn bids were last freely bid, ora price at which denied switched bids were last freely bid, depending onthe bids needed to just fill the tranche target.

In another embodiment of the invention, a target auction volumecomprises a total number tranches that a total number of electricdistribution companies will purchase through the computer-based auction.

In another embodiment of the invention, the Auction Manager is capableof revising the target auction volume.

In another embodiment of the invention, the Auction Manager pauses thecomputer-based auction in order to revise the target auction volume at atime that is one of during and after a bidding phase of a round.

In another embodiment, a method conducts a computer-based, simultaneous,multiple round, descending clock auction for basic generation services.The method includes the sequential, non-sequential, andsequence-independent steps of receiving electronic bids from qualifiedbidders indicating two or more desired tranches of one or more productsat a specified starting price set by an Auction Manager for each one ormore products during a first round of bidding. Each product comprises abasic generation service load of an electric distribution company. Atranche represents an equal portion of the electric distributioncompany's basic generation service load.

The method also optionally includes calculating a second round price foreach of the products for a second round of bidding based on thespecified starting price and a number of tranches bid for each of theproducts during the first round of bidding. The second round price islower than the specified starting price for any of the at least one ofthe plurality of products that received a number of tranches bid greaterthan a tranche target for that product during the first round ofbidding. The second round price is equal to the specified starting pricefor any of the at least one of the plurality of products that received anumber of tranches bid one of equal to and less than the tranche targetfor that product during the first round of bidding.

The method further optionally includes sending a first round result ofthe first round of bidding to the qualified bidders. The first roundresult includes the second round price for each of the products and anotice of the number of tranches bid during the first round for each ofthe products and/or another measure of bidding activity such as excesssupply. The method also includes receiving bids for two or more tranchesof the products from qualified bidders at the second round price duringthe second round of bidding.

The method further optionally includes repeating the steps of receivingbids, calculating next round prices and sending round results for at oneor more subsequent rounds of bidding following the second round. Asubsequent round price for each of the products for the subsequentrounds of bidding is based on a previous round price of an immediatelyprevious round of bidding and a number of tranches bid for each ofproducts during the immediately previous round of bidding. Thesubsequent round price is lower than the previous round price for any ofthe products that received a number of tranches bid greater than atranche target for that product during the immediately previous round ofbidding. The subsequent round price is equal to the previous round pricefor any of the products that received a number of tranches bid equal toor less than the tranche target for that product during the immediatelyprevious round of bidding. The round result includes the subsequentround price for each of the products and a notice of the number oftranches bid during the immediately previous round of bidding for eachof the products. The round results also optionally include anothermeasure of bidding activity such as the amount of excess supply offered.

The method also optionally includes determining when the number oftranches bid during a round of bidding is equal to or less than thetranche target for each of the products, and, when the number oftranches bid for the round of bidding is equal to or less than thecertain threshold for each of the products such that no further biddingcan take place under the auction rules, ending the auction after theround of bidding and awarding winning bidders an ending price for eachof the products won by the winning bidders. A maximum number of tranchesbid which is capable of being made by a single qualified bidder is equalto or less than a bidding eligibility of that qualified bidders.

During the second round or subsequent rounds of bidding, the step ofreceiving bids further optionally includes receiving, from one or moreof the qualified bidders, a withdrawal request and/or a switch request.The withdrawal request indicates a desire of the qualified bidder makingthe withdrawal request to remove a first indicated number of tranchesfrom at one or more particular products and to reduce a maximum numberbids that that qualified bidder is capable of making in future rounds ofthe auction. A switch request indicates a desire of the qualified biddermaking the switch request to switch a second indicated number oftranches from one of the products to one or more different products. Theending price for each of products is a final price from a final round ofbidding, a named exit price, a price at which retained withdrawn bidswere last freely bid, or a price at which denied switched bids were lastfreely bid, depending on the bids needed to just fill the tranchetarget.

In another embodiment, a method conducts an auction in simultaneous,multiple round, descending clock auction format for basic generationservices. The method includes the sequential, non-sequential, andsequence-independent steps of receiving bids from qualified biddersindicating one or more desired tranches of one or more products at aspecified starting price set by an Auction Manager for each one or moreproducts during a first round of bidding. Each product comprises a basicgeneration service load of an electric distribution company. A trancherepresents an equal portion of the electric distribution company's basicgeneration service load.

The method also optionally includes calculating a second round price foreach of the products for a second round of bidding based on thespecified starting price and a number of tranches bid for each of theproducts during the first round of bidding. The second round price islower than the specified starting price for any of the at least one ofthe plurality of products that received a number of tranches bid greaterthan a tranche target for that product during the first round ofbidding. The second round price is equal to the specified starting pricefor any of the at least one of the plurality of products that received anumber of tranches bid one of equal to and less than the tranche targetfor that product during the first round of bidding.

The method further optionally includes sending a first round result ofthe first round of bidding to the qualified bidders. The first roundresult includes the second round price for each of the products and anotice of the number of tranches bid during the first round for each ofthe products and/or another measure of bidding activity such as excesssupply. The method also includes receiving bids for two or more tranchesof the products from qualified bidders at the second round price duringthe second round of bidding.

The method further optionally includes repeating the steps of receivingbids, calculating next round prices and sending round results for at oneor more subsequent rounds of bidding following the second round. Asubsequent round price for each of the products for the subsequentrounds of bidding is based on a previous round price of an immediatelyprevious round of bidding and a number of tranches bid for each ofproducts during the immediately previous round of bidding. Thesubsequent round price is lower than the previous round price for any ofthe products that received a number of tranches bid greater than atranche target for that product during the immediately previous round ofbidding. The subsequent round price is equal to the previous round pricefor any of the products that received a number of tranches bid equal toor less than the tranche target for that product during the immediatelyprevious round of bidding. The round result includes the subsequentround price for each of the products and a notice of the number oftranches bid during the immediately previous round of bidding for eachof the products. The round results also optionally include anothermeasure of bidding activity such as the amount of excess supply offered.

The method also optionally includes determining when the number oftranches bid during a round of bidding is equal to or less than thetranche target for each of the products, and, when the number oftranches bid for the round of bidding is equal to or less than thecertain threshold for each of the products such that no further biddingcan take place under the auction rules, ending the auction after theround of bidding and awarding winning bidders an ending price for eachof the products won by the winning bidders. A maximum number of tranchesbid which is capable of being made by a single qualified bidder is equalto or less than a bidding eligibility of that qualified bidders.

During the second round or subsequent rounds of bidding, the step ofreceiving bids further optionally includes receiving, from one or moreof the qualified bidders, a withdrawal request and/or a switch request.The withdrawal request indicates a desire of the qualified bidder makingthe withdrawal request to remove a first indicated number of tranchesfrom at one or more particular products and to reduce a maximum numberbids that that qualified bidder is capable of making in future rounds ofthe auction. A switch request indicates a desire of the qualified biddermaking the switch request to switch a second indicated number oftranches from one of the products to one or more different products. Theending price for each of products is a final price from a final round ofbidding, a named exit price, a price at which retained withdrawn bidswere last freely bid, or a price at which denied switched bids were lastfreely bid, depending on the bids needed to just fill the tranchetarget.

In another embodiment of the invention, the step of receiving bidsmanually from qualified bidders includes receiving bids orally usingtelephonic means, receiving bids through postal mail, hand delivery,and/or receiving bids by facsimile.

In another embodiment of the invention, the step of submitting a roundresult is performed manually by means including sending the round resultorally using telephonic means, sending the round result through postalmail, hand delivery, and/or sending the round result by facsimile.

In another embodiment of the invention, the Auction Manager processesthe bids using a computer program and/or a spreadsheet.

There has thus been outlined, rather broadly, the more importantfeatures of the invention and several, but not all, embodiments in orderthat the detailed description thereof that follows may be betterunderstood, and in order that the present contribution to the art may bebetter appreciated. There are, of course, additional features of theinvention that will be described hereinafter and which will form thesubject matter of the claims appended hereto.

In this respect, before explaining at least one embodiment of theinvention in detail, it is to be understood that the invention is notlimited in its application to the details of construction and to thearrangements of the components set forth in the following description orillustrated in the drawings. The invention is capable of otherembodiments and of being practiced and carried out in various ways.Also, it is to be understood that the phraseology and terminologyemployed herein are for the purpose of description and should not beregarded as limiting.

As such, those skilled in the art will appreciate that the conception,upon which this disclosure is based, may readily be utilized as a basisfor the designing of other structures, methods and systems for carryingout the several purposes of the present invention. It is important,therefore, that the claims be regarded as including such equivalentconstructions insofar as they do not depart from the spirit and scope ofthe present invention.

Further, the purpose of the foregoing abstract is to enable the U.S.Patent and Trademark Office and the public generally, and especially thescientists, engineers and practitioners in the art who are not familiarwith patent or legal terms or phraseology, to determine quickly from acursory inspection the nature and essence of the technical disclosure ofthe application. The abstract is neither intended to define theinvention of the application, which is measured by the claims, nor is itintended to be limiting as to the scope of the invention in any way.

These, together with other objects of the invention, along with thevarious features of novelty that characterize the invention, are pointedout with particularity in the claims annexed to and forming a part ofthis disclosure. For a better understanding of the invention, itsoperating advantages and the specific objects attained by its uses,reference should be had to the accompanying drawings and descriptivematter in which there is illustrated preferred embodiments of theinvention.

BRIEF DESCRIPTION OF THE DRAWINGS

FIGS. 1A and 1B are flowcharts of a prior art method of computer-basedauctioning;

FIG. 2 is flowchart of a prior art method of computer-based auctioning;

FIG. 3A is a block diagram of a prior art system for computer-basedauctioning;

FIG. 3B is a flowchart of a prior art method of computer-basedauctioning;

FIG. 4 is a network diagram of a system for computer-based auctioning ofbasic generation services according to the present invention;

FIG. 5 is a block diagram of a system for computer-based auctioning ofbasic generation services according to the present invention;

FIG. 6 is a flowchart of a method of conducting a computer-based auctionfor basic generation services according to the present invention;

FIG. 7 is a flowchart of a method of a pre-auction process according tothe present invention;

FIGS. 8A and 8B are flowcharts of a method of conducting a first roundof bidding for basic generation services according to the presentinvention;

FIGS. 9A and 9B are flowcharts of a method of conducting a second roundof bidding for basic generation services according to the presentinvention;

FIG. 10 is a flowchart of a method of making withdrawal requests in anauction for basic generation services according to the presentinvention;

FIG. 11 is a flowchart of a method of making switching requests in anauction for basic generation services according to the presentinvention;

FIG. 12 is a flowchart of a method of conducting subsequent rounds ofbidding basic generation services according to the present invention;

FIG. 13 is a flowchart of a method of determining ending prices forwinning bidders in an auction for basic generation services according tothe present invention;

FIG. 14 illustrates sample results of an auction for basic generationservices;

FIG. 15 illustrates a sample round report;

FIG. 16 illustrates an Auction Manager's round report;

FIG. 17 is an illustration of a computer used for implementing thecomputer processing in accordance with a computer-implemented embodimentof the present invention;

FIG. 18 illustrates a block diagram of the internal hardware of acomputer; and

FIG. 19 illustrates a block diagram of an alternate embodiment of acomputer used for implementing the computer processing in accordancewith a computer-implemented embodiment of the present invention.

DESCRIPTION OF THE PREFERRED EMBODIMENTS

Reference now will be made in detail to the presently preferredembodiments of the invention. Such embodiments are provided by way ofexplanation of the invention, which is not intended to be limitedthereto. In fact, those of ordinary skill in the art may appreciate uponreading the present specification and viewing the present drawings thatvarious modifications and variations can be made.

For example, features illustrated or described as part of one embodimentcan be used on other embodiments to yield a still further embodiment.Additionally, certain features may be interchanged with similar devicesor features not mentioned yet which perform the same or similarfunctions. It is therefore intended that such modifications andvariations are included within the totality of the present invention.

Overview

The auctioning method and system of the current invention arose fromactivities that took place within the New Jersey energy market. NewJersey implemented retail choice in August of 1998, at which time thestate adopted a four-year transition period. During the first threeyears of the transition period, New Jersey's electric distributioncompanies supplied electricity to customers who did not switch to acompetitive retailer. In the fourth year, however, the restructuringlegislation called for competitive suppliers to provide basic generationservices.

New Jersey held a statewide auction in 2002 in response to thislegislative imperative. The goal of the auction was to provide basicgeneration services to customers at a cost consistent with marketconditions and to move forward the transition in New Jersey to retailprovision of these services. The New Jersey auction allowed the electricdistribution companies to procure full-requirements service, whichconsists of the necessary energy, capacity, network transmission, andancillary services to serve basic generation demand.

The present invention is directed to a computer-based system forconducting a simultaneous, multiple round, descending clock (“SDCA”)auction. The embodiment described below pertains particularly toauctioning of basic generation services (“BGS”), although the auctionformat can be applied to auctions for other types of goods, products, orservices. BGS serves as a backstop for those customers who either do notswitch to a competitive supplier, or who are dropped by theircompetitive supplier.

The “product” for a BGS auction is the amount of supply, or load,required by a particular electric distribution company (“EDC”). The BGSload for an EDC is the load associated with retail electricity customersand is obtained by subtracting the load of third party suppliers fromretail load in an EDC zone.

A biddable portion of a particular product is called a tranche. Atranche is a fixed percentage of an EDC's BGS load that represents, forexample, approximately 100 MW (megawatts) of peak demand. Each EDCestimates its BGS peak load share in order to determine the number oftranches to be purchased through the auction.

A winning bidder, or supplier, will provide full requirements servicefor the percentage of the EDC's BGS load that corresponds to the numberof tranches won. Full requirements service means that the provider isresponsible for fulfilling all of the requirements of a Load ServingEntity (“LSE”), including capacity, energy, ancillary services, andtransmission. A supplier may win two or more tranches for one or moreEDCs. In exchange for assuming this responsibility, a winning supplierreceives the final auction price, or ending price, for the load itserves. The load served by a winning supplier is equal to its share ofthe EDC's BGS load (the number of tranches won times the size of thetranche) times the EDC's BGS load for the period. The final auctionprice is a price in cents per kWh (¢/kWh), and it may be different foreach product.

For example, a supplier wins 7 tranches, or 13.72% of the total load,for the EDC Alpha Power at a price of 6.1¢/kWh. If, in a month, theAlpha Power load were 2,100,000 MWh, then the supplier would be paid$17.575 million (13.72% of 2,100,000 MWh at 6.1¢/kWh).

The SDCA auction is simultaneous in that all relevant products, e.g.,tranches for all of the EDCs, can be sold at once, thus lowering thecost of bidder participation and the cost for an Auction Manager ofholding the auction.

In a multiple round format, after bidders have finished a round, theycan get information regarding the current state of bidding and can makean informed and strategic decisions for bidding in the next round. Themultiple round format is advantageous in that it induces bidders to movefrom one product to another whenever there are unwarranted pricedifferentials among products.

In a round, the Auction Manager announces a price for each EDC. Biddersbid by providing the number of tranches that they are willing to servefor each EDC at the prices announced by the Auction Manager. If thesupply bid is greater than the load to be procured for an EDC, the pricefor that EDC is reduced for the next round. In the next round, biddersare given an opportunity to bid again.

Finally, in the descending clock format, prices for each productdecrease incrementally from the specified starting price until supply isjust sufficient to meet the product demand, which is the load to beprocured for each EDC. Bidders that hold the final bids when the auctioncloses are the winners. All products are set at a fixed and/or uniformprice (hereinafter referred to as “fixed price”) a particular round.Therefore, the bidders are bidding, not on price, but rather on theamount of service they are willing to supply for a particular product.There are several benefits of fixed prices for products. One is thatfixed prices give bidders a transparent way to determine the price ofthe products on which they are bidding. Such transparency reduces therisk to bidders and encourages maximum participation. Furthermore, fixedensures that portions of a particular product all sell for the sameprice.

Auction System

In one embodiment of the present invention, bids are acceptedelectronically through web-based auction software. One of moreembodiments of the auction software is based on the Simul Commerce™auction software owned by Optimal Auctions, Inc (d/b/a/Alkera, Inc.),located at 2000 Powell Street, Suite 510 Emeryville, Calif. 94608. (SeeAppendix A.) The basic and standard Simul Commerce™ software is designedfor ascending, multiple round auctions, and is incorporated herein byreference. In order to accommodate the SDCA auction, the Simul Commerce™software was modified to perform the functionality described herein.(See Appendix B.) Other standard auction software packages mayoptionally be used.

FIG. 4 is a network diagram of a system for computer-based auctioning ofBGS according to the present invention. Auction system 400 comprises,for example: client browsers 402; wide-area network 404, e.g., theInternet; application server 406; web server 408; auction applicationsoftware 410; and auction database server 412.

FIG. 5 illustrates the architecture of the software utilized toimplement the auction method of the current invention. The auctionsoftware accepts bids from the bidder entered from a local workstationover a public communications network, e.g., the Internet, and thenprocesses the bid. The auction software also allows the Auction Managerto monitor the auction from a central location.

Although the Auction Manager may be a person, in one embodiment, thedecisions made by the Auction Manager and actions taken by the AuctionManager during the course of the auction are influenced by informationprovided by the application software. Therefore, in the descriptionbelow, the actions attributed to the Auction Manager are facilitated, atleast in part, by auction application software 410.

The bidder enters a bid on a client browser 402, e.g., a personalcomputer, over the network, utilizing, for example, a web browser suchas Microsoft™ Internet Explorer. The bid is submitted electronically toapplication server 406 by way of web server 408 in tier 2. Web server408 and application server 406, also in tier 2, may reside on a singlecomputer located at the Auction Manager's location, or may reside onseparate computers. A program hosted by web server 408 sends a web pageto the client browser in tier 1, which is used by the bidder to formatand submit its bid. The bidder populates the webpage with its biddinginformation and submits the bid over the network to the web sever 408and on to application server 406 in tier 2 using secure technology.

Application server 406 uses software, for example, standard JakartaTomcat 3.2.2, or other standard software, to handle the biddingtransaction. The tier 2 application server 406 also runs auctionapplication software 410 in tier 3. Auction application software 410controls the auction, in this case, the SDCA auction format 510, andprocesses submitted bids according to the auction rules. The functionsperformed by auction application software 410 include tracking,monitoring, and determining when to end the auction. For example,auction application software 410 in tier 3 calculates the prices foreach round, determines when the supply bid is sufficient to meet theload to be procured, identifies which bidders are winners of the finalbids, and calculates ending prices for each EDC.

The auction database server 412 in tier 4 stores bidder data obtainedthrough the application and qualification process and the informationregarding the products being auctioned, e.g., the tranche targets andload caps of the electronic distribution companies (“EDCs”). To processsubmitted bids, application server 406, running auction applicationsoftware 410, accesses the auction database server 412 to write bidderand product data to the auction database server 412 and to read the datafrom the auction database server 412. The auction database server 412does not perform any calculations associated with the auction. Theauction database server 412 may be maintained separately from the webserver 406 and application server 406 to maintain the security of theinformation stored in database and can also be located at the AuctionManager's location.

The Auction Manager also may maintain a back-up server and a systemlogin computer (not shown), which logs all hits to web server 408 andapplication server 406, in addition to maintaining web server 408,application server 406, and the auction database server 412. Thiscomplete complement of servers allows the Auction Manager to retaincontrol over all aspects of the auction process.

In addition to submitting bids electronically using a computer, in oneor more embodiments of the present invention, bidders may also submitbids using other, non-computer methods, in view of the advantageousauction rules. Bid may be submitted, for example, orally using atelephone (bidder calls in bid to the Auction Manager), by mail (biddermails in bid to the Auction Manager), hand delivery (bidder handdelivers bid to the Auction Manager), or by facsimile (bidder faxes inbid to the Auction Manager). Other, non-computer-based methods ofsubmitting bids are also contemplated by the present invention. Bidssubmitted manually, for example, through mail, hand delivery, orfacsimile, may be submitted using a spreadsheet format, denoting thequantity of trenches bid for each EDC.

Auction Process

For the auctioning of BGS, a “product” is an EDC's BGS load. A trancherepresents an equal portion of an EDC's BGS load. As described below ingreater detail, bidders bid a number of tranches of each product. A“bid” is the number of tranches of each EDC's system to which a bidderwished to subscribe. A tranche of a product is a “full requirementstranche” of the BGS load for an EDC. A full requirements tranche meansthat the supplier is responsible for fulfilling all the energyrequirements, including capacity, energy, ancillary services,transmission, and any other service as may be required. The size of atranche for an EDC is a given percentage of the BGS load. Thispercentage is set individually for each EDC so as to representapproximately, for example, 100 MW of BGS Peak Load Share.

Due to weather, migration, load growth, and other factors, the actualobligations of each tranche are subject to uncertainty. BGS suppliersmust be ready to meet any changes in these obligations. Data, which maybe made available to potential suppliers before the start of the BGSauction includes, for example: BGS peak load allocations and total zonalvalues for capacity and transmission; the hourly demand of the BGS load;the periods and approximate quantities of all known sources of committedsupply which terminate during the period in which suppliers would serveror which span this period; and BGS monthly switching history (number ofcustomers and estimated load). Information on how these data are relatedto a potential BGS supplier's obligation may also be provided. The datamay include the associated losses.

The SDCA auction format proceeds in a series of rounds. During thebidding phase of each round, each bidder indicates how many tranches ofeach EDC the bidder wishes to serve at the prices announced by theAuction Manager. After the bidding phase of a round, the Auction Managerreduces the price for the tranches of an EDC by a decrement if thebidders subscribe to more tranches for that EDC than are available. Ifthe tranches of an EDC are just subscribed or are undersubscribed, theannounced price of a tranche for that EDC does not change in the nextround. The Auction Manager then announces the new prices for each EDCbefore bidding in the next round opens.

Each round is formally divided into two phases: a “bidding” phase and a“reporting” phase. In the bidding phase, bidders submit their bids. Inthe BGS auction, the primary means for bidding is for bidders to loginto auction application software 410 through an auction website andsubmit their bids on-line during the bidding phase. As long as thebidding phase is open, bidders can revise their bids. The last bid thata bidder submits and that was confirmed during the biding phase of theround is the bid that counts.

If a bidder has bid on an EDC and the price of the EDC's tranches doesnot decrease in a round, the bidder cannot reduce the number of tranchesbid for that EDC. The bidder cannot withdraw tranches from that EDC orswitch from that EDC to another, as described below in more detail.However, even if a bidder cannot decrease the number of tranches bid foran EDC for many rounds, a bidder may be able to do so later in theauction as other bidders switch into the product whose price hasremained higher. Furthermore, bidders cannot increase the total numberof tranches they bid during the auction. If a tranche is not offered inthe first round, it cannot be offered later in the auction. Once atranche is withdrawn from the auction, it cannot be bid again.

All bids are considered to be binding offers to supply the stated numberof tranches for each EDC at the going prices announced by the AuctionManager. Offers to supply at the going prices cannot be rescinded. If anEDC is fully subscribed once, either the bids on that EDC remain untilthe end of the auction, or the bids (some or all of them) are replacedby offers to supply the same quantity at a lower price. Thus, as long aseach EDC is fully subscribed at some point during the auction, then eachEDC will be fully subscribed at the end of the auction.

In the reporting phase of the round, the Auction Manager reviews theresults of the previous bidding phase and informs the bidders of theseresults. All bidders are informed of the going prices for the nextbidding phase and are provided with a measure of the total number oftranches bid in the auction or another measure of activity, such as theamount of excess supply. Each bidder privately receives the results ofthe bidder's own bid from the previous round, but no information as toother bidders' bids, providing each bidder with its obligation at thispoint in the auction. In one embodiment, round results may be sent tobidders over web server 408 to client browser(s) 402. In one or morealternate embodiments, round results may be reported manually, forexample, orally using a telephone, by mail, hand delivery, or byfacsimile.

The auction continues and the prices tick down until, for each EDC'ssystem, the total number of tranches subscribed falls to the point whereit equals the number of tranches needed. When the auction ends, thebidders holding the tranches at the final auction prices are the auctionwinners.

Winners for each product are not determined until the auction has closedfor all products. It is possible for the price of a particular EDC notto tick down because the number of tranches bid is just equal to thenumber of tranches desired. However, as the auction progresses and theprices for the other products tick down, some bidders will switch tothat EDC, which will cause the price for the EDC's tranches to tick downagain. Hence, until bidding stops for all products, the winners cannotbe determined for any one product. There is no matching of suppliers tocustomers during the course of the auction or selection of winner by theAuction Manager. At the end of the auction, suppliers are revealed to bewinners by not withdrawing from the auction. All bidders that wintranches for an EDC are given the same price per kWh.

FIG. 6 is a flowchart of a method of conducting a computer-based auctionfor basic generation services according to the present invention. Ingeneral, auction process 600 comprises, for example, a pre-auctionprocess (step 602), a first round of bidding (step 604), and secondround of bidding (612), any subsequent rounds of bidding (step 616) asare necessary, and an end-of-auction process, that includes calculatingending prices for each EDC (step 620).

During the pre-auction process (step 602), bidders qualify toparticipate in the auction and the Auction Manager announces the tranchetarget and load cap for each EDC. The load cap may be specified for theentire auction volume instead. The tranche target is the number oftranches that a particular EDC wants to purchase. The load cap for anEDC is a maximum number of tranches that any one bidder can bid for thatEDC. In the case of a load cap for the entire auction, the load cap is amaximum number of tranches that any one bidder can bid in the auction.An EDC can impose a load cap to limit its exposure to any one creditsource. The Auction Manager also announces the starting prices for eachEDC. The pre-auction process is described below in more detail.

After the pre-auction process is completed, bidders participate in afirst round of bidding (step 604). During or after the first round ofbidding, the Auction Manager may determine that the target auctionvolume, i.e., the number of tranches to be procured through the auction,needs to be revised (step 606), to ensure the competitiveness of theauction. The Auction Manager may then call a pause in the auction, or a“time-out (step 608), to revise the target auction volume (step 610).The time-out may be called during or immediately after the bidding phaseof the first round. The time-out last for a pre-determined period oftime, for example, four hours, after which the reporting phase of theround resumes.

The target auction volume is initially set to be the full BGS load forall EDCs. The full BGS load is the largest portion of BGS load that canbe purchased through the auction. If the target auction volume isrestricted to less than 100% of the BGS load for all EDCs, each EDC mayimplement a contingency plan for their remaining tranches. If the fullBGS load is purchased through the auction, then no portion of the BGS ispurchased through the contingency plan. Under their contingency plans,the EDCs may purchase necessary services including, for example,installed capacity, and ancillary services, etc., throughPJM-administered markets. An EDC would implement its contingency plan ifits tranches were not fully subscribed or if a winning bidder defaults.

If revision of the target auction volume is necessary, the AuctionManager uses a set of guidelines, which may be pre-approved by anappropriate governing body, to reset the target auction volume. Therevised target auction volume is determined as a function of the sum ofbids in the first round and a target eligibility ratio (a desired ratioof first round bids to the full BGS load). In addition, factors such asthe number of bidders and individual bids could be taken into account insetting the target eligibility ratio and in deciding whether the targetauction volume should be the full BGS load for all EDCs.

The target auction volume is reset to the number of tranches bid in thefirst round divided by a parameter, which represents the ratio of thefirst round bids to the full BGS load, called initial eligibility ratio.The parameter is chosen by the Auction Manager to be between, forexample, 1.25 and 1.6. The precise value of this parameter depends onvarious factors, such as the number of bidders and the characteristicsof individual bids. This adjustment ensures that, to start the auction,there are between 1.25 and 1.6 tranches bid for every tranche to bebought, and therefore, it is a competitive bidding environment. Thefollowing example illustrates how it is envisioned that the targeteligibility ratio, the first round bids, and a target contingency planlimit would be used to determine whether and by how much the targetauction volume should be revised. The target contingency plan limit is adesired bound on the exposure of the EDCs to the contingency planexpressed as a percentage of full BGS load. This bound may be exceededto ensure a competitive bidding environment. In an alternate embodiment,the auction may not have a contingency plan limit and/or may usedifferent ratios than used in this example.

The first step in determining whether the target auction volume shouldbe revised is for the Auction Manager to determine the parameter, orinitial eligibility ratio. If this ratio is, for example, 1.9, itindicates that for each tranche available, bidders stand ready to supply1.9 tranches at the starting prices. Suppose, for illustrative purposes,that the target eligibility ratio is 1.5. If the calculated initialeligibility ratio is 1.5 or more, then the auction proceeds for the fullBGS load of each EDC. If the calculated initial eligibility ratio islower than 1.5, then the target auction volume will be revised and theremainder of the full BGS load would be procured through the contingencyplan, as is explained below.

If the auction cannot proceed for the full BGS load, the second step isfor the Auction Manager to determine the percentage of tranches procuredthrough the contingency plan when the target auction volume is revisedso as to produce a 1.5 initial eligibility ratio. For example, givenfirst round bids that total 120 tranches, an initial eligibility ratioof 1.5 would mean that the target auction volume would be restricted to80 tranches (120/80=1.5). The remainder of the tranches (with a full BGSload of, for example, 95 tranches, leaving a remainder of 15 tranches)would be procured through the contingency plan. (Incidentally, in thisexample, a full BGS load of 95 tranches would have produced an initialeligibility ratio of 1.26, which would prompt the Auction Manager torevise the target auction volume.)

As another example, in the bidding phase of round 1, the target auctionvolume is 170 tranches, which is the sum of all of the EDCs' tranchetargets. Suppose that there is a total of 222 tranches bid in the firstround, making the initial eligibility ratio 1.3. Given the number ofbidders and the characteristics of the bids, the Auction Manager setsthe initial eligibility ratio at 1.5. The target auction volume is then148 tranches (222/1.5). In round 2, there will be 1.5 tranches bid forevery tranche to be purchased through the auction (222/148=1.5). Thiswould leave 22 tranches (170−148=22) to be procured through thecontingency plan.

Suppose, for example, that the EDCs set their target contingency planlimit to 20%. If the tranches procured through the contingency planrepresent 20% or less of the full BGS load, then the auction willproceed with the revised target auction volume that results in a 1.5initial eligibility ratio. If, by imposing a 1.5 initial eligibility,the tranches procured through the contingency plan represent more than20% of the full BGS load, then the third step is to readjust the targetauction volume so as to reduce exposure to the contingency plan. Thetarget auction volume is increased until the target limit exposure tothe contingency plan is reached. If this target auction volume resultsin an eligibility ratio of 1.25, for example, no further adjustments aremade. Otherwise, the target auction volume is further adjusted until theeligibility ratio of 1.25 is reached.

For instance, if there were 90 tranches bid in the first round, theauction volume for an initial eligibility ratio of 1.5 would be 60(90/60=1.5). With a full BGS load of 95 tranches, there would be 35tranches, or 37% left. The Auction Manager would increase the targetauction volume to 72 tranches. When the target auction volume is 72tranches, the initial eligibility ratio is 90/72=1.25 and the exposureto the contingency plan is ((90−72)/95)×100%)=24%. Even though this isnot within the 20% contingency plan limit of the example, the targetauction volume is not increased any further so as to maintain the 1.25initial eligibility ratio.

The Auction Manager also retains the discretion to revise load caps forthe EDCs after the target auction volume is revised, based on therevised target auction volume and the sum of the first round bids. AnEDC may require that its lad cap, if it is revised, only be reviseddownward. As early as possible during the time-out, the Auction Managerannounces the revised auction volume, as well as a new tranche targetfor each EDC and any revised load caps. Once the time-out is over (if itwas called), the reporting phase of the round resumes.

Based on the bids as the auction progresses, in order to ensure acompetitive bidding environment, revision of the target auction volumemay occur during the second and subsequent rounds of the auction, aswell, at the discretion of the Auction Manager. The target auctionvolume may be revised once during or after the second round of theauction. This adjustment can occur whether or not there is a volumeadjustment in the first round.

After round one ends, including any auction volume revisions, the secondround of bidding occurs (step 612). After the second round of biddingends, the Auction Manager, utilizing auction application software 410,determines whether the criteria for ending the auction have been met(step 614). If the criteria have been met, the auction ends (step 618),otherwise, subsequent bidding rounds continue (step 616).

The auction ends for all EDCs at once. The auction ends when bidding hasstopped on all EDCs and no further bidding is possible. At the pricesfor the round, the number of tranches bid is equal to (or is smallerthan) the tranche target for each EDC. The auction can end, for example,only if there are no retained switches that have been outbid and thatcould subsequently be bid on an EDC, as described below in greaterdetail. Bidders that win tranches for an EDC are those that bid at thelast round price and, if necessary, those that had tranches retained(from a switch or from a withdrawal) to fill the tranche target of thatEDC. All bidders that win tranches for an EDC are given the same endingprice for their tranches, as calculated by auction application software410 (step 620). Winning bidders are then notified (step 622), forexample, by way of client browsers 402.

A. Pre-Auction Process

FIG. 7 is a flowchart of a method of a pre-auction process according tothe present invention. Pre-auction process 602 begins as the AuctionManager announces the tranche targets and load caps for each EDC (step700). The Auction Manager also announces a single maximum starting priceand a single minimum starting price for all EDCs (step 710). Maximum andminimum starting prices may be based on, for example, statewide pricelimits and/or may be specified by the individual EDC.

The EDCs, in consultation with the Auction Manager, may determine that,due to extraordinary events, the single maximum starting price and thesingle minimum starting price require revision. In this event, theschedule may also be revised. If the indicative offers have already beenreceived, the Auction Manager would request that the qualified biddersrevise their indicative offers on the basis of the revised singlemaximum starting price and the revised single minimum starting price.

Such a revision to would happen if an extraordinary event occurs betweenthe time at which the single maximum and single minimum starting pricesare announced and the day on which the auction starts. All of the EDCspreferably agree on what constitutes an extraordinary event. Suchextraordinary events could include, for instance, a significant changein the rules.

If an extraordinary event occurs, the EDCs determine a revised singlemaximum starting price and a revised single minimum starting price onthe basis of methodology approved by the appropriate governing body. Thebidders then make new indicative offers, as described below. Thedetermination of new maximum and minimum starting prices, the submissionof new indicative offers, and, the announcement of new starting pricesis done so as to afford qualified bidders sufficient time to revisetheir indicative offers.

Potential suppliers then qualify to participate in the auction and makeindicative offers (step 720). The qualification process may include, forexample satisfying financial qualifications and disclosures ofassociations with other potential suppliers.

Qualification criteria are agreed upon by all EDCs whose systems arepart of the auction. As conditions of qualification, applicant must, forexample: meet pre-bidding credit worthiness requirements; agree tocomply with all rules of the auction; and agree that, if they becomeauction winners, they will execute an agreement with a certain timeperiod after certification of the auction results, and that they willdemonstrate compliance with the creditworthiness requirements. Anexample of a qualification form is included in Appendix C. Interestedparties are notified at some time before the start of the auctionwhether they have become qualified bidders and may participate in theauction. After the qualification process, the Auction Manager may sendsimultaneously to each qualified bidder a list of all qualified bidders.

Certifications as to associations between qualified bidders must also beprovided. A qualified bidder is associated with another qualified bidderif the two bidders have ties that could allow them to act in concert orthat prevent them from competing actively against each other in theauction. The competitiveness of the auction and the ability of theauction process to deliver competitive prices may be harmed by thecoordinated or collusive behavior that such associations facilitate. TheAuction Manager, who may rely on, amongst other factors, the number ofindependent competitors to set the target auction volume, will be usinginaccurate information unless such associates are duly disclosed. Thetarget auction volume is a number of tranches that the EDCs willpurchase through the auction. Associations may be considered in settingthe target auction volume and may be used in the application of loadcaps.

Sanctions may be imposed on a qualified bidder for failing to discloseinformation relevant to determining associations or coordinating withanother qualified bidder. Such sanctions may include, but are notlimited to, loss of all rights to serve any BGS load won in the auctionby such a bidder, forfeiture of bid bonds and other fees posted or paid,prosecution under applicable state and federal laws, and otherappropriate sanctions. Further information regarding Association andConfidential Information Rules may be found in Appendix D.

After qualifying to participate in the auction, qualified bidders thensubmit an indicative offer along with a bid bond. A sample form for thesubmission of bid bonds and indicative offers is included in Appendix E.The bid bond is a certain amount per tranche, for example, $1 millionper tranche, of the indicative offer, to be provided in a formacceptable to the EDCs. Pre-auction security in addition to the bid bondmay be required based upon the creditworthiness assessment made of thequalified bidder during the qualification process. Pre-auction securityis also submitted in a form acceptable to the EDCs.

An indicative offer states a number of tranches that the qualifiedbidder is willing to serve statewide at the single maximum startingprice and a number of tranches that the qualified bidder is willing toserve statewide at the single minimum starting price. The number oftranches at the maximum starting price is the qualified bidder's“initial eligibility.” The number of tranches indicated by the qualifiedbidder cannot exceed the sum of the load caps for all the EDCs. Thenumber of tranches indicated by the qualified bidder at the maximumstarting price cannot be fewer than two tranches.

The qualified bidder is also asked to indicate its maximum interest ineach EDC at the maximum and at the minimum starting prices. The sum ofthe qualified bidder's maximum interest in each EDC at a given price canexceed the statewide number of tranches that the qualified bidder iswilling to serve at that price. Information that a qualified bidderprovides regarding its interest in any particular EDC has no effect oninitial eligibility or subsequent bidding in the auction. Indicativeoffers are considered in determining starting prices. Since the bidder'sinitial eligibility constrains bidding activity for the duration of theauction, qualified bidders should state in their indicative offers themaximum number of tranches that they wish to serve.

For example, if a qualified bidder indicates that it will serve up to atotal number of 20 tranches at the maximum starting price (the initialeligibility), then the qualified bidder could also indicate that it iswilling to serve a maximum of 20 tranches for one EDC, 15 for anotherEDC, 8 for a third EDC, and 2 for a fourth EDC. The sum of the qualifiedbidder's maximum interest in each EDC (here, 45 tranches) exceeds thestatewide number of tranches indicated by the bidder (the initialeligibility, 20). The qualified bidder is declaring itself willing toserve at most 20 tranches in total, and willing to serve all of thetranches from the first EDC. The qualified bidder would also e willingto serve, at most, 15 of those 20 tranches from the second EDC, and, atmost, 8 and 2 tranches from the last two EDCs, respectively.

The bid bonds that qualified bidders post are in proportion to theirinitial eligibility. For example, a qualified bidder with an indicativeoffer that specifies that, at the maximum starting price, the bidderwishes to serve at most 20 tranches would post a bid bond of $20 million(20 tranches at $1 million each). Bid bonds remain in full force untilthe auction is concluded and the bidder has won no tranches, or untilthe auction is concluded and the bidder has won tranches, has signed thepost-auction agreement, and has provided security, if appropriate, in aform acceptable to the EDC or EDCs. The EDCs can collect the bid bondsif bidders fail to comply with their obligations.

After a qualified bidder submits its indicative offer and bid bond, andafter they are accepted, the qualified bidder becomes a registeredbidder. The Auction Manager may send simultaneously to each registeredbidder a list of all registered bidders and information regarding thetotal initial eligibility in the auction, which is the sum of all of theinitial eligibilities of the registered bidders.

After all bidders who will be participating in the auction havequalified and registered, the Auction Manager announced the startingprices for the first round of the auction and the target auction volume,which may be later revised, as described above (step 730). The startingprice for each EDC is set no higher than the single maximum startingprice and no lower than the single minimum starting price. Each EDC setsits own starting price, though the Auction Manager may advice the EDCsand an appropriate government agency may have an opportunity to observethe decision process. The Auction Manager announces the starting pricesfor all EDC at some time after all bidders are registered but before thestart of the auction.

The auction data, which includes, for example, the target auctionvolume, the EDC tranche targets and load caps, the qualified bidders'initial eligibility, and the starting prices for each EDC is stored inauction database server 412 (step 740). Pre-auction process 700 ends andauction process 600 proceeds to the first round of bidding (step 604).

B. First Round of Bidding

FIGS. 8A and 8B illustrate a method of conducing a first round ofbidding according to the present invention. The first round of biddingstarts as web server 406 and application server 408 receive bids fromqualified bidders using, for example, client browsers 402 (step 800). Asstated previously, a bid may also be submitted manually, by, forexample, telephone, facsimile, mail, or hand delivery. A bidder selectshow many tranches the bidder wants to serve from each EDC at thestarting prices. For example, if there are four EDCs participating inthe auction, a bid would consist of four numbers, the number of tranchesthe bidders wants to supply for each of the four EDCs at the startingprices for the EDCs. An example bid could look like the following:

EDC EDC I EDC II EDC III EDC IV Starting Price 7.000 7.222 6.739 7.325(in ¢/kWh) Bid 10 0 4 1 (in tranches)

This bid indicates that the bidder stands ready to supply 10 EDC Itranches, no EDC II tranches, 4 EDC III tranches, and 1 EDC IV trancheat the starting prices for each EDC. It should be noted that the bidderis free to structure its bids as it desires and to bid different foreach EDC, up to the bidder's initial eligibility. Since the bidder isbidding a total of 15 tranches, the bidder's initial eligibility wasgreater than or equal to 15 tranches. In the second round, the bidder'seligibility will be limited to its first round bids, in other words, 15tranches, regardless of the bidder's initial eligibility. Auctionapplication software 410 stores the bidder's second round eligibility toauction database server 412.

There are several rules for bids submitted during the first round ofbidding, for example: the bid must be for at least two tranches intotal; the total number of tranches bid cannot be over the bidder'sinitial eligibility; and the number of tranches bid for any one EDCcannot be over that EDC's load cap.

The Auction manager evaluates the submitted bids based upon the auctionrules using auction application software 410. In an alternateembodiment, the Auction Manager processes and evaluates the bidsmanually using, for example a computer program or a spreadsheet. Auctionapplication software 410 determines whether the bid is for at least twotranches (step 802), whether the bid is within the bidder's initialeligibility (step 804), and whether the bid violates an EDC load cap(step 806). Auction application software 410 retrieves such informationas the bidder's initial eligibility and the EDCs load caps from theauction database server 412. If any of these rules are violated, the bidis rejected and the bidder is invited to bid again. The auctionapplication software may, for example, send a message to the bidder byway of application server 408 and web server 406 over the Internet 404to the bidder's client terminal 402. A message notifying the bidder thatthe bid is rejected and why the bid is rejected may be displayed on theclient browser 402.

If the bidder's bid does not violate any of the first round biddingrules, or once a satisfactory bid is submitted by a bidder who didviolate one or more of the first round bidding rules, auctionapplication software 410 determines whether the bid was submitted withina pre-determined time limit (step 808), as illustrated in FIG. 8B.

A bidder that has not submitted a bid in within the time limit, forexample, 10 minutes, automatically triggers an extension to the biddingphase (step 810). The extension is of limited duration, for example, 15minutes. Alternatively, a bidder may directly contact the AuctionManager to request an extension, for example, by phone. During thisextension, all bidders have the opportunity to submit new bids if theyso wish (step 812). Bidding extensions are used, for example, in casesof technical problems that prevent a bidder from submitting a bid withinthe time limit. Each bidder is allowed a limited number of extensionsduring the course of the auction, for example, 3 total extensions. Theavailable number of round extensions for all bidders who request or aregranted an extension during a bidding phase is decremented (step 814).Also, even if several bidders trigger or request an extension, thebidding phase is extended for a maximum of one extension duration, i.e.,15 minutes total.

Once all bids have been received and any extensions have elapsed, thefirst round moves into the reporting phase. As described above, theAuction Manager may call a time-out to revise the target auction volumeat the beginning of the reporting phase or after the reporting hasended.

During the reporting phase, auction application software 410 calculatesthe prices for each EDC for the second round of bidding according to theauction rules (step 816). The price for an EDC's tranches for the secondround is the same as the first round price when the number of tranchesbid in the first round is insufficient to fill the number of tranchesdesired, or when the number of bid is only just equal to the number oftranches desired. The price for an EDC's tranche ticks down when thenumber of tranches bid for that EDC exceeds the tranche target. Usingthe EDCs of the previous example:

EDC EDC I EDC II EDC III EDC IV Starting Price 7.000 7.222 6.739 7.325(in ¢/kWh) Tranche Target 96 51 19 4 Total Bid 192 68 23 4 (in tranches)

In this example, the total number of tranches bid exceeded the tranchetargets for EDC I, EDC II, and EDC III therefore, the second roundprices for those three EDCs will be lowered. The total number oftranches bid for EDC IV, however, just equal the tranche target for thatEDC. Therefore, the second round price for EDC IV will be the same asthe first round price for EDC IV, namely, 7.325¢/kWh.

An EDC's price is calculated so that it ticks down more quickly thelarger the excess supply of tranches bid over the tranche target.Conversely, the price ticks down more slowly when the excess supply oftranches bid over the tranche target is small. The Auction Manager hasthe discretion to override any one EDC's price decrement calculation asdetermined by auction application software 410. In all cases, thedecrease in price for an EDC from one round to the next is, for example,between 0.25% of the previous round price and 2.5% of the previous roundprice. Prices are rounded off to, for example, the nearest thousandth ofa cent.

The tables below show details of the calculation of the decrease inprice. There are three tables because the formulas used are slightlydifferent depending on an EDC's tranche target. The measure of excesssupply used in the calculation is the ratio of the number of tranchesbid to the tranche target for the EDC (designated by “r” in the tables).When an EDC's tranche target is 9 or less, the calculation also takesinto account a measure of excess supply in the entire auction (“R”).This auction-wide measure of excess supply is the ratio of the number oftranches bid in the entire auction to the number of tranches desired forall EDCs combined.

TABLE 1 Percentage Price Decrease for an EDC with a tranche target of 20or more Excess supply 0% or Less than Between 20% Exceeds (as percentageless 20% and 100% 100% of tranches desired) Measure of r · 1 1 < r < 1.21.2 · r · 2 R > 2 excess supply Percentage 0% .25% (.028125r − 2.5%decrease in .03125) × price 100%

Note that, when the excess supply is 0% or less, this indicates that thenumber of tranches bid for that EDC is less than or equal to the tranchetarget for that EDC. In that case, the price is not decremented, asdiscussed previously.

Applying these calculations to the two EDCs in the prior example thathad tranche targets of 20 or more, EDC I and EDC II, we can determinethe second round prices for these tranches. For EDC I, the tranchetarget is 96 and the total number of tranches bid in the first round was192 tranches. Therefore, r=(192/96)=2. This means that the excess supplyfor EDC I in the first round was 100%. Using the appropriatecalculation, the percentage decrease in price for EDC I is:((0.028125*2−0.03125)×100%)=2.5%. Therefore, the second round price forEDC I will be: (7¢/kWh−(7¢/kWh*2.5%))=6.825¢/kWh.

Likewise, for EDC II, the tranche target is 68 and the total number oftranches bid in the first round was 51 tranches. Therefore,r=(68/51)=1.33. This means that the excess supply for EDC II in thefirst round was 33%. Using the appropriate calculation, the percentagedecrease in price for EDC I is: ((0.028125*1.33−03125)×100%)=0.616%.Therefore, the second round price for EDC I will be:(7.222¢/kWh−(7.222¢/kWh*0.62%)=7.178¢/kWh.

TABLE 2 Percentage Price Decrease for an EDC with a tranche targetbetween 9 and 19 tranches Excess supply 0% or Less than Between 75%Exceeds (as percentage less 75% and 250% 250% of tranches desired)Measure of r · 1 1 < r < 1.75 1.75 · r · 2.5 R > 2.5 excess supplyPercentage 0% .25% (.03r − .05) × 2.5% decrease in 100% price

Applying these calculations to the EDC in the prior example that had atranche target between 9 and 19 tranches, EDC III, we can determine thesecond round prices for this tranche. For EDC III, the tranche target is19 and the total number of tranches bid in the first round was 23tranches. Therefore, r=(23/19)=1.2. This means that the excess supplyfor EDC I in the first round was 20%. Using the appropriate calculation,the percentage decrease in price for EDC II is: 0.25%. Therefore, thesecond round price for EDC I will be:(6.739¢/kWh−(6.739¢/kWh*0.25%)=6.722¢/kWh.

TABLE 3 Percentage Price Decrease for an EDC with a tranche target of 9or less Excess supply 0% or Less than Between 75% and Exceeds (aspercentage less 75% for the 250% for the EDC 250% for of tranches EDC orand between 0% the EDC desired) below 0% in and 50% in the and theauction auction exceeds 50% in the auction Measure of r · 1 1 < r < 1.75or 1.75 · r · 2.5 or r > 2.5 excess supply R < 1 1 · R · 1.5 and R > 2.5Percentage 0% .25% The smaller of: 2.5% decrease in {((.45R − .0425) *price 100%) and ((.03r − .05) * 100%)}

Applying these calculations to the EDC in the prior example that had atranche target of 9 or less tranches, EDC IV, we can determine thesecond round prices for this tranche. For EDC IV, the total tranches bidwas equal to the tranche target. Therefore, there would be no pricechange for the second round of bidding. However, supposing that a totalof 7 tranches were bid for EDC IV in the first round, since the tranchetarget is 4, r=(7/4)=1.75. This means that the excess supply for EDC IVin the first round was 75%. The excess supply for the entire auction isR=(290/170)=1.6. Using the appropriate calculation, the percentagedecrease in price for EDC IV is: MIN{((0.045R−0.0425)*100%) and((0.03r−0.05)*100%)}=MIN{((0.045*1.6−0.0425)*100%) and((0.03*1.75−0.05)*100%)}=MIN{2.95% and 0.25%}. Therefore, the secondround price for EDC IV would be:(7.325¢/kWh−(7.325¢/kWh*0.25%)=7.307¢/kWh.

It should be noted that the auction rules applied to the previousexamples may be altered and other embodiments of the auction rules areanticipated by the present invention. Decrement rules for the auction,however, have several, consistent features for all auctions, forexample: the price decrement equals zero decrement if the number of bidsis equal to, or less than, the tranche target; the price decrement is atsome pre-determined minimum when the number of bids exceeds the tranchetarget by 1 or 2 tranches, or some other minimal amount; the pricedecrement is between a pre-determined minimum and maximum, as anincreasing function of the excess supply; the price decrement is at somepre-determined maximum when the excess supply reaches a pre-determinedlarge amount; and the size of the price decrements may be changed as theauction progresses and bidders are advised.

After all of the second round prices have been calculated, the AuctionManager then announces the calculated second round prices to all biddersand provides a range of the total number of tranches bid in the auction(step 818). Bidders, however, are not provided any information as to anyindividual bidder's bids. In another embodiment, the Auction managerannounces the excess supply bid on the various products.

The method of reporting the range of the total number of tranches bidsdepends upon ratio of the total eligibility for a round to the totalnumber of tranches bid in that round, called an eligibility ratio. Whenthe eligibility ratio is above 1.2, the Auction Manager reports a rangeof five numbers that includes the actual total number of tranches bid.The top end of the range is, for example, a number that is divisible byfive.

For example, suppose that the total number of tranches in the auction,the sum of all the EDCs' tranche targets, is 182 and that the totalnumber of tranches bid in the first round, which is the totaleligibility for the second round of bidding, is 252. Then, theeligibility ratio is 1.4 (252/182=1.4). Therefore, in the reportingphase of the first round, the Auction manager announces that theeligibility in the second round of bidding is the range of five integersbetween 251 and 255, namely: 251, 252, 253, 254, and 255. Note that theactual number of tranches bid in the first round, 252, falls within thisrange.

As the auction progresses, the total eligibility for a bidding rounddecreases. When the eligibility ratio falls below 1.2 but above 1, theAuction Manager reports a range of ten numbers that includes the actualtotal number of tranches bid. The top end of the range is, for example,a number that is divisible by five. For the preceding example, when thetotal eligibility is reported to be in the 216-220 range, theeligibility ratio has fallen for the first time to 1.2 or below whenrounded up to the nearest tenth (216−182=1.19 and 221/182=1.21). Sincepart of the eligibility ratio for this round is still above 1.2, a rangeof five integers is reported. For the next round, however, the AuctionManager reports the total eligibility to be, for example, 206-215, whichis a range of ten integers, the highest of which is divisible by 5.

In another embodiment of the present invention, rather than announce thenumber of tranches bid in the previous round of bidding, the AuctionManager employs another measure of bidding activity, for example, theexcess supply offered during the previous round of bidding. A similarrange method may still be used to report the excess supply.

When the total eligibility for a round falls below the total number oftranches available, that is to say, when the eligibility ratio fallsbelow 1, the Auction Manager may simply announce that the totaleligibility is below the total number of tranches available in theauction, for example, below 182 tranches.

C. Second Round of Bidding

After the reporting phase of round one ends, and the Auction Manager hasmade any revisions to the target auction volume, the second round ofbidding begins (step 612). FIGS. 9A and 9B illustrate a method ofconducting a second round of bidding according to the present invention.The second of round of bidding begins similarly to the first round ofbidding, with web server 406 and application server 408 receiving bidsfrom qualified bidders using client browsers 402 (step 902). A bid maybe designated as desired by the bidder, so long as the bid does notviolate the auction rules.

There are two rules for bids submitted during the second round ofbidding, for example: the number of tranches bid for any one EDC cannotbe over that EDC's load cap (step 906); and the total number of tranchesbid from a particular bidder cannot be over the number of tranches bidin the first round (step 904), which becomes the bidder's eligibilityfor the second round. In general, a bidder's eligibility for a round,after the first round, is the total number of tranches bid in theprevious round at the previous round prices. Auction applicationsoftware 410 retrieves this information, i.e., the EDCs load caps andthe bidding eligibility for each bidder, from auction database server412. If either of these rules are violated, the bid is rejected and thebidder is invited to bid again, as described for the first round ofbidding.

Furthermore, a second round bid, as well as subsequent round bids, mayspecify several additional several additional pieces of information:from which EDC(s) tranches are to be withdrawn; exit price(s) forwithdrawn tranches; from which and to which EDC(s) tranches are to beswitched; and switching priority for switched tranches. Withdrawalrequests and switching requests will be discussed below in greaterdetail (see FIGS. 10 and 11).

A bidder can submit the same bid as in the first round. A bidder canalso perform two additional bidding actions: a bidder that wishes tochange its bid can bid on fewer tranches for one or more EDCs, thusrequesting to withdraw some tranches from the auction (step 908); or, abidder can request to switch tranches from one EDC to another (or toseveral others) (step 912). A bidder can also do both simultaneously,bid on fewer tranches in total, and switch some of the tranches bid fromone EDC to one or several others. But, as previously stated, a biddercannot increase its total number of tranches bid in the second roundfrom its bid in the first round, or between any two rounds, in general.

After completion of a withdrawal request (step 910) and/or switchingrequest (step 914), or if the bidder does not make either request,auction application software 410 determines whether the bids have beensubmitted with in the time limit (step 916). As described with respectto round one, if one or more bidders is late, an extension isautomatically triggered. Auction application software 410 firstdetermines whether the late bidder(s) has any remaining extensions left(step 918). If none of the late bidders have any extensions left, thelate bidder forfeits the round (step 920). All other bidders are invitedto make new bids (step 922), as described previously.

If the late bidder does have remaining extensions, or another latebidder has remaining extension, an extension is triggered (step 924).All bidders are invited to make new bids (step 926) and the number ofextensions outstanding for the late bidder(s) is decremented (step 928).If, however, one late bidder has no remaining extensions, but anotherbidder that has remaining extension is also late, the bidder having theremaining extension and all other non-late bidders may submit new bids.The late bidder that had no remaining extensions optionally forfeits theround.

Auction application software 410 then calculates the prices for thesubsequent round of bidding (930), as described above. Again, those EDCswith bids greater than their tranche targets have their pricesdecremented for the subsequent round. Those EDCs with bids equal to orless than their tranche targets have their prices remain the same forthe subsequent round. The number of tranches bid in the second round andthe prices for the subsequent round are then announced to the bidders(step 932). As described previously, the manner in which the range ofthe number of tranches bid in the second round is reported depends onthe eligibility ratio for that round.

In addition to what the Auction Manager reports to all bidders about thegeneral progress of the auction, the Auction Manager reports privatelyto each bidder the outcome of its own bid but does not report the bid ofone bidder to another bidder. The Auction Manager simply reports anybids the bidder made during the round and reports any retainedwithdrawals or retained switches for that round.

The second round of bidding ends and auction application software 410determines whether the auction ending criteria are met (step 614). Ifnot, bidding continues with a subsequent round (step 616).

D. Withdrawal Requests and Switching Requests

The Auction Manager typically accepts a bid that is unchanged. TheAuction Manager generally accepts withdrawals and switches, but does notalways do so. The Auction Manager may retain in whole and in parttranches that a bidder wants to withdraw. The Auction Manager willretain one or more withdrawn if, by accepting all withdrawals from andswitches out of the EDC, the tranche target for the EDC would no longerbe filled.

The Auction Manager may also keep on an EDC some or all of the tranchesthat a bidder wants to switch from that EDC. The Auction Manager willkeep these tranches if, even by retaining all withdrawals, the tranchetarget for the EDC would no longer be filled. That is, to fill thetranche target, the Auction Manager takes first tranches bid at thecurrent round price, then retains tranches that bidders want towithdraw, and, finally, retains tranches that bidders wanted to switch.

1. Withdrawing Tranches

As illustrated in FIG. 10, a withdrawal request begins when a bidderindicates that it wishes withdraw tranches from one or more EDC (step1000). The bidder also indicates how many tranches from each specifiedEDC it wishes to withdraw (step 1010).

A bidder can bid on fewer tranches for an EDC only if the price for thatEDC's tranches has decreased in from the previous round to the currentround. If, instead, the price for an EDC's tranches has not changed fromthe previous round to the current round, indicating that the total bidsfor that EDC in the previous round were at or below that EDC's tranchetarget, then the bidder's offer made in the previous round at theprevious round price is still standing, and the bidder cannot bid onfewer tranches for that EDC.

The Auction manager determines whether the withdrawal request is to bedenied (step 1020) by determining whether the price for the indicatedEDC(s) has decreased from the previous round. If the price for theindicated EDC(s) has decreased, then the tranche target for that EDC hasbeen satisfied and auction application software 410 removes theindicated tranches from the auction (step 1030).

If, however, the price for the indicated EDC(s) has not decreased fromthe previous round or the Auction manager determines that fulfilling thewithdrawal request in full would cause the total number of tranches bidfor the indicated EDC(s) to fall below the tranche target, the AuctionManager denies the withdrawal request and retains a portion or all ofthe withdrawn tranches, as appropriate (step 1040).

A bidder that withdraws tranches has the option of naming an exit price(step 1050). A bidder names an exit price when it is willing to serve atranche at the previous round's price and unwilling to serve the trancheat the current round's price. An exit price enables the Auction managerto determine which bidder would have remained ready to serve an EDC hadthe price ticked down continuously rather than in lumpy, discrete pricedecreases. The Auction manager relies on exit prices when, as a resultof bidders withdrawing tranches and/or switching out of an EDC, the EDChas a number of tranches bid at the previous round price that equals orfalls short of the tranche target for that EDC. The tranches of biddersthat named lower exit prices are retained first, and they are retainedat the exit price that the bidder has named (step 1060). Exit pricesthus facilitate the process whereby the bidding process leads to theself-selection of winning bidders in the auction.

A bidder that withdraws several tranches for a given EDC specifies, forexample, the same exit price for all tranches from that EDC. An exitprice is, for example, greater than the EDC's current round price (aprice at which the bidder is not willing to bid). An exit price is also,for example, no larger than the previous round price (at which thebidder was willing to bid). A bidder that withdraws tranches fromseveral EDCs can specify a different exit price for each EDC. If abidder does not specify an exit price, it is assumed that the bidder iswithdrawing the tranche or tranches at the previous round price (step1070). If two or more bidders name the same exit price for theirtranches (or both bidders name no exit price), then the bidder with abid confirmed earlier in the round has its tranches retained first.Otherwise, a decision on which tranches to retain may be made randomly,on a tranche by tranche basis.

For example, the first round prices and the round 1 bid for Bidder Aare:

EDC EDC I EDC II EDC III EDC IV Starting Price 7.000 7.222 6.739 7.325(in ¢/kWh) Total Bid 10 0 4 1 (in tranches)The second round prices are:

EDC EDC I EDC II EDC III EDC IV Second Round 7.000 7.041 6.604 7.325Price (in ¢/kWh)

Bidder A's second round bid must specify the same number of tranches bidfor EDC I and EDC IV because the prices for these EDCs' tranches did notchange from the first round. In its second round bid, Bidder A requeststo withdraw two tranches from EDC III, bringing its bid from 4 to 2tranches. Bidder A enters an exit price of 6.700¢/kWh, which is betweenthe second round price of 6.604¢/kWh and the first round price of6.739¢/kWh. The exit price named by Bidder A could have been equal tothe first round price, 6.739¢/kWh but not equal to the second roundprice, 6.604¢/kWh.

Tranches that are indicated in a withdrawal request are consideredwithdrawn, and the bidder's eligibility for the next round is reduced bythe number of withdrawn tranches (step 1080). The bidder forfeits theright to bid these tranches on that EDC or any other EDC for theremained of the auction. Eligibility is lost even if a bidder names anexit price and even if the tranches are subsequently retained.

During the reporting phase of the round, the Auction Manager reportsprivately to a bidder if the bidder intended to withdraw tranches andsome or all of the tranches are retained. The Auction manager informsthe bidder of the number of withdrawn tranches that are being retainedfor each EDC. The Auction Manager also reports the price at which thesetranches are retained, either a named exit price or the price of theprevious round at which the tranche(s) was last freely bid, depending onthe bids needed to just fill the tranche target. The Auction managercontinues to report the trances as being retained as long as they arestill necessary to fill the tranche target of an EDC. Retained tranchesare no longer necessary to fill the tranche target, and can then bereleased when new tranches are bid at the current round price. Withdrawntranches with the higher exit prices (or at the previous current price,when an exit price was not named) are the first to be released. Therelease of the withdrawn tranches are reported to the bidder. Releasedwithdrawals are removed from the auction and may no longer be bid.

2. Switching Tranches

Switching involves decreasing the number of tranches bid for one or moreEDCs (the EDCs that the bidder is switching from) and increasing thenumber of tranches for one or more EDCs (the EDCs that the bidder isswitching to). The rules for switching are similar to the rules forwithdrawing tranches. In one embodiment, a bidder can switch tranchesfrom an EDC only if the price for that EDC's tranches has decreased fromthe previous round to the current round. Again, if, instead, the pricefor an EDC's tranches has not changed from the previous round to thecurrent round, then the bidder cannot switch bids from an EDC and bidfewer tranches for that EDC.

As illustrated in FIG. 11, when making a switching request, the bidderindicates from which EDC(s) and to which EDC(s) it was bids to beswitched (step 1100). The bidder also indicates the number of tranchesfrom and to each indicated EDC that are to be switched (step 1110). TheAuction Manager determines whether or not to accept a switching requestor to deny the request in part or in full (step 1120).

If the switch request does not violate the auction rules, the switchrequest is accepted and the indicated tranches are switched from and tothe indicated EDCs (step 1130). However, when necessary to satisfy thetranche target(s) of the EDC(s) from which tranches are requested to beswitched, the Auction Manager may deny the switch request. From amongthe bidders that intended to switch out of the EDC, the Auction Managerallows the bidder with a bid confirmed earlier in the round to switchfirst.

If the bidder or another bidder(s) has also requested that tranches bewithdrawn from the problematic EDC, the Auction Manager determineswhether or not denying the withdrawal request and retaining thewithdrawn tranches will fully satisfy that EDC's tranche target (step1140). If retaining the withdrawn tranches is sufficient to satisfy theEDC's tranche target, the indicated tranches are allowed to be switched(step 1130). Otherwise, some or all of the switched tranches areretained, as appropriate to satisfy the EDC's tranche requirement, atthe previous round price at which the switched tranches were last freelybid for that EDC (step 1150).

When switching into more than one EDC, the bidder specifies a switchingpriority. A switching priority is a preference among those EDCs intowhich a bidder is switching. The Auction Manager uses the bidder'sswitching priority when accepting to switch some, but not all, tranchesthe bidder requested to switch out. The switching priority is used when,for example, to keep the tranche target of an EDC filled, the AuctionManager must retain all tranches that were withdrawn out of that EDC,and must retain some but not all of the bidder's switched bids on thatEDC. The Auction Manager switches the switchable tranches into the EDCto which the bidder has assigned the highest priority. The bidderassigns, for example, the same priority to all tranches from a givenEDC. The tranches that the Auction Manager retains to fill the tranchetarget are retained at the previous round price.

For example, Bidder B submits the following bid in the second roundafter this history in the first round:

EDC EDC I EDC II EDC III EDC IV Starting Price 7.000 7.222 6.739 7.325(in ¢/kWh) Total First 15 7 4 4 Round Bid (in tranches) Second Round7.000 7.041 6.604 7.325 Price (in ¢/kWh) Total Second 15 4 5 6 Round Bid(in tranches)

Bidder B bids a total of 30 tranches in both the first round and thesecond round. In its second round bid, Bidder B switches out of EDC IIand into EDCs III and IV. Bidder B gives the switching priority to EDCIII. Therefore, tranches are first switched from EDC II to EDC III andthen, if possible, into EDC IV. If the Auction Manager keeps twotranches from the switch out of EDC II, only one tranche is switched,and it is switched to EDC III, since EDC III has the highest switchingpriority. The two tranches kept for EDC II are retained at a price of7.222¢/kWh, which is the last price at which the two tranches werefreely bid.

During the reporting phase of the round, the Auction manager reports tothe bidder how many tranches from a switch request out of an EDC arebeing retained. The report is made for all EDCs from which the bidderhas tried to switch unsuccessfully. The price at which the tranches areretained are price of the previous round, which is the last price atwhich the tranche was freely bid. The Auction Manager continues toreport these tranches as being retained as long as they are stillnecessary to fill the tranche target of an EDC.

With sufficient new tranches bid at the current round price for the EDC,retained switches can be released. Released switches are reported to thebidder. Released switches are considered to be “outbid” because the newtranche bid at the current round price replaces a switch retained at ahigher price. Furthermore, new tranches bid at the current price firstreplaced retained switches in filling the tranche target for the EDC anthen the new tranches replace retained withdrawals. The release of theretain switch is reported to the bidder. Once a retained switch isoutbid, the bidder is free to bid this tranche on any EDC.

If the bidder, while retaining tranches on an EDC from a denied switchin a previous round, bids new tranches for the that EDC on which thereleased switches are being retained at the price for the current round,the bidder is deemed to have bid all of its eligible tranches at thecurrent round price, including any tranches retained from a previouslydenied switch. That is, retained tranches become tranches that are bidat the going price.

For example, in rounds 6, 7, and 8, Bidder C bids as follows:

EDC EDC I EDC II EDC III EDC IV Price Round 6 6.500 7.000 6.739 6.987(in ¢/kWh) Total Sixth 0 0 7 0 Round Bid (in tranches) Price Round 76.338 6.983 6.722 6.812 (in ¢/kWh) Total Seventh 0 7 0 0 Round Bid (intranches)

In round 7, Bidder C requests a switch of 7 tranches from EDC III to EDCII. The Auction Manager denies part of the switch. Bidder C, in thereporting phase of round 7, is informed that its bid consists of 3 EDCII tranches at 6.983¢/kWh, the round 7 price, and 4 EDC III tranches at6.739¢/kWh, the round 6 price at which the EDC III tranches were lastfreely bid.

EDC EDC I EDC II EDC III EDC IV Report to 0 3 @ 6.983 4 @ 6.739 0 BidderC

In round 8, Bidder C switches back 2 tranches from EDC II to EDC III. Atthe new round 8 prices, Bidder C bids 1 bids 1 EDC II tranche and 2 EDCIII tranches. The 4 retained tranches are kept on EDC II and cannot befreely bid.

EDC EDC I EDC II EDC III EDC IV Price Round 8 6.308 6.913 6.722 6.792(in ¢/kWh) Total Eighth 0 1 2 0 Round Bid (in tranches) Retained 4 @6.739 Tranches

Bidder C has bid new tranches for EDC III at the round 8 price whichhaving switches retained at a higher price. Bidder C is then deemed tohave bid all 6 tranches for EDC III at the round 8 price of 6.722¢/kWh,as shown below:

EDC EDC I EDC II EDC III EDC IV Price Round 8 6.308 6.913 6.722 6.792(in ¢/kWh) Effective 0 1 6 0 Eighth Round Bid (in tranches)

When a bidder requests to both withdraw tranches and switch tranches inthe same round, the rules given above for withdrawing and switch apply.Additionally, when a bidder is both withdrawing and switching, thebidder may be asked to specify which tranches are being withdrawn andwhich tranches are being switched. This occurs when the bidder reducesthe number of tranches bid for more than on EDC. The tranche(s) that thebidder specifies have been withdrawn is the tranches(s) for which thebidder may name an exit price.

D. Subsequent Rounds of Bidding

Subsequent rounds of bidding after the second round proceed as necessaryuntil the auction ending criteria are met, as described previously.Subsequent rounds of bidding proceed similarly to first and secondrounds of bidding, however, the release of retained withdrawals orswitches may also be considered.

In FIG. 12, bids are received indicating tranche bids for specific EDCsand whether there are any withdrawal or switch requests (step 1200).Bidder eligibility, which depends on the total number of tranches bidplaced by the bidder in the previous round of bidding, and EDC load capchecks are made for the bids (step 1210). The Auction Manager determineswhether, based on the new bids, any retained withdrawals or switches areto be released (step 1220). If there are any retained withdrawals orswitches to be released, the released withdrawals are removed from theauction and the released switches may be rebid on any EDC at the currentround price (step 1230). Any new withdrawal or switching requests aredecided by the Auction Manager (step 1240) and are fulfilled or deniedas appropriate (1250). Bidding extensions are triggered if necessary andif available (step 1260). After the bidding phase has ended, the pricesfor the subsequent round are calculated (step 1270). A range of thetotal number of tranches bid for the round, as appropriate for the giveneligibility ratio, subsequent round prices, and any retained and/orreleased withdrawals and/or switches are reported to the bidders (step1280). The auction continues with a subsequent round until the endingcriteria for the auction are met.

During a reporting phase of any round, a bidder may request a suspensionof the auction for a specified period, for example, one hour. A recessgives a bidder the opportunity to take additional time later in theauction to put in a bid. Bidders can first request a recess when theratio of total eligibility to the total number of tranches in theauction falls below 1.2. The total eligibility measure used is the lowerbound of the reported range. The Auction Manager informs bidders whenthey can request recesses.

Bidders may request a recess, for example, in the last half of thereporting phase of a round, or before the last, for example, fiveminutes of the reporting phase of a round, whichever is shorter. Eachbidder is allowed to request at most, for example, one recess during theauction. All bidders making a request in a given reporting phase willsee their number of recesses available fall from, for example, one tozero. If more than one bidder requests a recess, the auction is pausedonly for a specified recess period.

E. Calculating Ending Prices

FIG. 13 illustrates a method of calculating ending prices for the BGSauction according to the current invention. The auction ends for allEDCs at once. The auction ends when bidding has stopped on all EDCs andno further bidding is possible. No further bidding is possible when, atthe prices for the round, the number of tranches bid for each EDC isequal to (or is smaller than) the tranche target for each EDC.Furthermore, for all EDCs, there are no retained switches that have beenoutbid and that could subsequently be bid on an EDC.

Bidders that win tranches for an EDC are those that bid at the lastround price and, if necessary, those that had tranches retained (from aswitch or from a withdrawal) to fill the tranche target of that EDC. Allbidders that win tranches for an EDC are given the same price for theirtranches. Once the ending criteria for the auction have been met, theAuction Manager, utilizing standard auction application software 410,determines the ending prices for each EDC (step 620) and winning biddersare notified (step 622).

For each EDC, the Auction Manager determines whether there were anyretained tranches, from retained withdrawals or denied switches, left inthe final round of bidding (step 1300). If, to fill the tranche targetfor the EDC in the final round only tranches bid at the price from thefinal round were used, meaning that there were no retained tranches forthat EDC, the winners are those that submitted bids at the price fromthe final round. The ending price given to all winner of that EDC is theprice from the final round of bidding (step 1310).

If there were retained tranches for the EDC in the final round ofbidding, the Auction Manager then determines whether the retainedtranches were only retained withdrawals (step 1320). If, to fill thetranche target for the EDC in the final round, withdrawn tranches wereretained, then the winners are the bidders that submitted bids at theprice from the final round and the bidders that submitted the lower exitprices for the retained withdrawn tranches.

The Auction Manager determines whether any exit prices were named forthe withdrawn tranches (step 1330). If exit prices were named, theending price for the tranches for all of the winners of that EDC is thelowest, earliest submitted exit price (step 1340). The exit prices namedfor any round of the auction are considered in determining the lowestnamed exit price. The lowest exit price, rather than the price of thefinal round, is the ending price for all tranches of that EDC.

If, during the round in which the lowest exit price was named, more thanone bidder submitted the same exit price, the bidder that submitted abid earlier in that round is the first to win the tranches. Therefore,the ending price of all tranches for that EDC is the highest acceptedprice, since an exit price submitted during a round prior to the finalround would be higher than the price of the final round of bidding.

If no exit prices were named for any withdrawn tranches for the EDC, theexit price is taken to be the price of the previous round in which thewithdrawal was made. Therefore, the ending price for all tranches of theEDC is the lowest exit price, or the price for the round prior to thelast round in which a tranche withdrawal was made (step 1350). This isthe price of the last round in which the latest withdrawn tranches werefreely bid.

If, to fill the tranche target for the EDC, there were tranches retainedfrom retained withdrawals and denied switches in the final round ofbidding, then the winners for that EDC are the bidders that submittedbids at the final round price, the bidders that withdrew their tranches,and the bidders that had their switched out of the EDC denied. Theending price for all winners of that EDC is the highest price for thetranches used to fill the tranche target, namely the price at which thedenied switches were last freely bid (step 1360).

For example, in round 45, 98 EDC I tranches are bid at a price of5.600¢/kWh. In round 46, 93 EDC I tranches are bid at a price of5.586¢/kWh. Five tranches total are withdrawn from EDC I in round 46.However, the tranche target for EDC I is 94 tranches, therefore onewithdrawn tranche is retained.

Bidder A bids 8 EDC I tranches in round 45 and 5 tranches in round 46,withdrawing 3 tranches. Bidder A does not enter any exit prices. BidderB, who bids after Bidder A, bids 5 EDC I tranches in round 45 and 3tranches in round 46, withdrawing 2 tranches. Bidder B names an exitprice of 5.590¢/kWh for the 2 withdrawn tranches. In order to fill thetranche target, Bidder A, who bid earliest, has one of its withdrawntranches retained at the price for round 45, 5.600¢/kWh.

In round 46, no other bidder changes its bid from round 45 and theauction ends in round 46. The 93 tranches bid in the final round for EDCI are won by the bidders that bid at 5.586¢/kWh, the final round pricefor EDC I. Bidder B additionally wins the two tranches that it withdrewin round 46, since it specified an exit price for those 2 tranches. Theexit price named by Bidder B is lower than the effective exit price forBidder A, the round 45 price, therefore, Bidder B wins its two withdrawntranches. However, Bidder A also wins the 1 tranche that had beenretained to fill the tranche target for EDC I. Since the highestaccepted price for EDC I tranches is 5.600¢/kWh, the effective exitprice for Bidder A for its retained tranche, all winning bidders receivean ending price of 5.6004¢/kWh for EDC I.

F. Round Reports

During the reporting phase of a round, the Auction Manager reportscertain information to the bidders, such as, the number of tranches bidin the current bidding round, the prices for the next round, whether thebidder had any denied withdrawal and/or switching requests, and whetherany retained withdrawals and/or switches are released for the nextround.

FIG. 14 illustrates sample results for the first five rounds of a BGSauction. The two EDCs involved in the auction are ABC and XYZ. Each EDChas tranche targets of 10 tranches. In the first five rounds, both EDCshave continued to be oversubscribed; therefore, their prices have tickeddown for each round.

FIG. 15 illustrates a sample round report with minimal information.Auction application software 410 can send this round report to allbidders, as the report gives no information regarding the activities ofother bidders. The round report for, in this case, round 4, gives arange for the total number of tranches bid in round 4. Since 36 trancheswere bid in round 4, the eligibility ratio for round 4 is 1.8. Since theeligibility ratio is greater than 1.2, the range reported is 35-40tranches, a five integer range. The round report also specifies theprice for the next round, round 5, for example, 5.95¢/kWh for ABC and6.10¢/kWh for XYZ.

FIG. 16 illustrates a round report that auction application software 410can generate for the Auction Manager. This report gives detailedinformation about the actual number of tranches bid in, for example,round 4. The report shows that 36 tranches were bid in round 4. TheAuction Manager's round report also details the initial eligibility forthe auction, for example, 40 tranches. This indicates that, betweenround 1 and round 4, a total of 4 tranches were withdrawn from theauction. As seen in the sample auction results (FIG. 14), the 4 trancheswere withdrawn from ABC in round 4. Finally, the Auction Manager's roundreport details the bids made by each qualified bidder in the round foreach EDC. This level of detailed information is generally not providedto bidders.

When the above auction method is conducted as a computer-basedelectronic auction using the system architectures of FIGS. 4 and 5, itis a possibility that a failure in communications between two or moreelements in the system. For example, a communication failure betweenclient browser(s) 402 and web server 406 could occur because of somedisruption in Internet 404. Additionally, a communication failure couldoccur between web server 406 and application software server 406, suchthat bid data cannot be passed to auction application software 410, orround report data cannot be passed from auction application software 410to web server 406 and, thus, to client browser(s) 402.

In such a case of a communication failure, one or more embodiments ofthe present invention includes procedures established in advance ofcommencement of the auction to provide bidders with confidentialidentification information and to accept, as binding, bids offered usingthis confidential identification information. Such bids may be submittedmanually, for example, by telephone, facsimile, hand delivery, and/ormail.

Computer Implementation

FIG. 17 is an illustration of a computer 1758 used for implementing thecomputer processing in accordance with a computer-implemented embodimentof the present invention. The procedures described above may bepresented in terms of program procedures executed on, for example, acomputer or network of computers.

Viewed externally in FIG. 17, computer 1758 has a central processingunit (CPU) 1768 having disk drives 1769, 1770. Disk drives 1769, 1770are merely symbolic of a number of disk drives that might beaccommodated by computer 1758. Typically, these might be one or more ofthe following: a floppy disk drive 1769, a hard disk drive (not shown),and a CD ROM or digital video disk, as indicated by the slot at 1770.The number and type of drives varies, typically with different computerconfigurations. Disk drives 1769, 1770 are, in fact, options, and forspace considerations, may be omitted from the computer system used inconjunction with the processes described herein.

Computer 1758 also has a display 1771 upon which information may bedisplayed. The display is optional for the computer used in conjunctionwith the system described herein. A keyboard 1772 and/or a pointingdevice 1773, such as a mouse 1773, may be provided as input devices tointerface with central processing unit 1768. To increase inputefficiency, keyboard 1772 may be supplemented or replaced with ascanner, card reader, or other data input device. The pointing device1773 may be a mouse, touch pad control device, track ball device, or anyother type of pointing device.

Alternatively, referring to FIG. 19, computer 1758 may also include a CDROM reader 1795 and CD recorder 1796, which are interconnected by a bus1797 along with other peripheral devices 1798 supported by the busstructure and protocol. Bus 1797 serves as the main information highwayinterconnecting other components of the computer. It is connected via aninterface 1799 to the computer 1758.

FIG. 18 illustrates a block diagram of the internal hardware of computer1758 of FIG. 17. CPU 1775 is the central processing unit of the system,performing calculations and logic operations required to execute aprogram. Read only memory (ROM) 1776 and random access memory (RAM) 1777constitute the main memory of the computer. Disk controller 1778interfaces one or more disk drives to the system bus 1774. These diskdrives may be floppy disk drives such as 1779, or CD ROM or DVD (digitalvideo/versatile disk) drives, as at 1780, or internal or external harddrives 1781. As previously indicated these various disk drives and diskcontrollers are optional devices.

A display interface 1782 permits information from bus 1774 to bedisplayed on the display 1783. Again, as indicated, the display 1783 isan optional accessory for a central or remote computer in thecommunication network, as are infrared receiver 1788 and transmitter1789. Communication with external devices occurs using communicationsport 1784.

In addition to the standard components of the computer, the computer mayalso include an interface 1785, which allows for data input through thekeyboard 1786 or pointing device, such as a mouse 1787.

The foregoing detailed description includes many specific details. Theinclusion of such detail is for the purpose of illustration only andshould not be understood to limit the invention. In addition, featuresin one embodiment may be combined with features in other embodiments ofthe invention. Various changes may be made without departing from thescope of the invention as defined in the following claims.

As one example, the system according to the invention may include ageneral-purpose computer, or a specially programmed special-purposecomputer. The at least one user may interact with the system via e.g., apersonal computer or over PDA, e.g., the Internet an Intranet, etc.Either of these may be implemented as a distributed computer systemrather than a single computer. Similarly, the communications link may bea dedicated link, a modem over a POTS line, and/or any other method ofcommunicating between computers and/or users. Moreover, the processingcould be controlled by a software program on one or more computersystems or processors, or could even be partially or wholly implementedin hardware.

The at least one user interfaces may be developed in connection with anHTML display format. Although HTML is utilized in the illustratedexamples, it is possible to utilize alternative technology fordisplaying information, obtaining user instructions and for providinguser interfaces. The invention has been discussed in connection withparticular examples. However, the principles apply equally to otherexamples and/or realizations. Naturally, the relevant data may differ,as appropriate.

The system used in connection with the invention may rely on theintegration of various components including, as appropriate and/or ifdesired, hardware and software servers, database engines, and/or othercontent providers. The configuration may be, preferably, network-basedand uses the Internet as a primary interface with the at least one user.

The system according to one or more embodiments of the invention maystore collected information and/or indexes to information in one or moredatabases. An appropriate database may be on a standard server, forexample, a small Sun™ Sparc™ or other remote location. The informationmay, for example, optionally be stored on a platform that may, forexample, be UNIX-based. The various databases maybe in, for example, aUNIX format, but other standard data formats may be used.

Although the computer system in FIG. 17 is illustrated as having asingle computer, the system according to one or more embodiments of theinvention is optionally suitably equipped with a multitude orcombination of processors or storage devices. For example, the computermay be replaced by, or combined with, any suitable processing systemoperative in accordance with the principles of embodiments of thepresent invention, including sophisticated calculators, hand held,laptop/notebook, mini, mainframe and super computers, as well asprocessing system network combinations of the same. Further, portions ofthe system may be provided in any appropriate electronic format,including, for example, provided over a communication line as electronicsignals, provided on floppy disk, provided on CD Rom, provided onoptical disk memory, etc.

Any presently available or future developed computer software languageand/or hardware components can be employed in such embodiments of thepresent invention. For example, at least some of the functionalitymentioned above could be implemented using Visual Basic, C, C++ or anyassembly language appropriate in view of the processor being used. Itcould also be written in an interpretive environment such as Java andtransported to multiple destinations to various users.

The many features and advantages of the invention are apparent from thedetailed specification, and thus, it is intended by the appended claimsto cover all such features and advantages of the invention, which fallwithin the true spirit and scope of the invention. Further, sincenumerous modifications and variations will readily occur to thoseskilled in the art, it is not desired to limit the invention to theexact construction illustrated and described, and accordingly, allsuitable modifications and equivalence may be resorted to, fallingwithin the scope of the invention.

1. A method of conducting a computer-based auction in simultaneous,multiple round, descending clock format, the method comprising the atleast one of sequential, non-sequential, and sequence-independent stepsof: (A) providing at least one bidders with confidential identificationinformation in advance of commencement of the auction for identifyingthe at least one bidders manually in the event of an electroniccommunication failure during the auction; (B) upon commencement of theauction, receiving at least one electronic bids from the at least onebidders by a computer system indicating at least one desired tranche ofat least one of a plurality of products, each of the at least one of theplurality of products comprising a basic generation service load of anelectric distribution company for a given period of time or term and theat least one tranche representing an equal portion of the electricdistribution company's basic generation service load; (C) processing bythe computer system the at least one electronic bid according to atleast one auction rule using auction software, said processingcomprising (C1) at least partially rejecting, by the computer system,for a refused number of tranches, a withdrawal request, when acceptingthe withdrawal request in full would cause the number of tranches bidfor the at least one particular product from which the bid would bewithdrawn to fall below a tranche target for that at least oneparticular product; (C2) retaining, by the computer system, at least oneof the refused number of tranches for the at least one of the pluralityof products on which the refused number of tranches was bid; and (C3)transmitting and reporting, by the computer system, the refused numberof tranches to the at least one bidder; (D) electronically sending bythe computer system an auction result to the at least one bidders, theauction result comprising at least one of current prices of the at leastone of the plurality of products, a current number of tranches bid foreach of the at least one plurality of products, and at least one winningbidders from the at least one bidders for each of the at least one ofthe plurality of products; and (E) in the event a communication failureoccurs such that the at least one electronic bids cannot be submittedfor the auction, implementing at least one communication failureprocedure, which enables the at least one bidders to be verified byreceiving the confidential identification information from the at leastone bidder, receiving at least one manual bid from the at least onebidder via at least one of a telephone, facsimile, hand delivery andmail, and accepting the at least one manual bid responsive to theverification of the confidential information by the computer system,thereby ensuring that the auction does not have to be postponed orcanceled due to the communication failure of the at least one electronicbid.
 2. The method of claim 1, wherein: during a first round of bidding,at least one bid is received by the computer system at a specifiedstarting price set by an Auction Manager for each of the at least one ofthe plurality of products; during at least one round subsequent to thefirst round of bidding in the multiple round auction, receiving, by thecomputer system, at least one second bid comprising receiving, from atleast one bidder, at least one of the withdrawal request and a switchrequest, wherein the withdrawal request indicates a desire of the atleast one bidders to remove a first indicated number of tranches from atleast one particular product of the at least one of the plurality ofproducts and to reduce a maximum number bids that the at least onebidder is capable of making in future rounds of the auction, and whereina switch request indicates a desire of the at least one-bidders toswitch a second indicated number of tranches from one of the at leastone of the plurality of products to at least one different one of the atleast one of the plurality of products, and wherein the ending price foreach of the at least one of the plurality of products is one of a finalprice from a final round of bidding, a named exit price, a price atwhich retained withdrawn bids were last freely bid, and a price at whichdenied switched bids were last freely bid.
 3. The method of claim 2,wherein the method further comprises, electronically receiving by thecomputer system, from the at least one bidder, at least one of an exitprice for the first indicated number of tranches in the withdrawalrequest and a null exit price for the first indicated number of tranchesin the withdrawal request.
 4. The method of claim 3, wherein the methodfurther comprises, determining, by the computer system, a same exitprice for all bids in the first indicated number of tranches when anexit price is named by at least one of the at least one bidder and atleast one second bidder.
 5. The method of claim 1, wherein the methodfurther comprises, when the bidder names an exit price, retaining, bythe computer system, the at least one of the refused number of tranchesfor which withdrawal is refused for the at least one of the plurality ofproducts on which the refused number of tranches was bid at a priceequal to the named exit price.
 6. The method of claim 1, wherein themethod further comprises, retaining, by the computer system, the atleast one of the refused number of tranches for which withdrawal isrefused, when the at least one bidder abstains from naming an exitprice, for the at least one of the plurality of products on which therefused number of tranches was bid at a price equal to a price of a lastround during which the refused number of tranches was freely bid beforethe withdrawal request was made.
 7. The method of claim 1, wherein themethod further comprises, lowering, by the computer system, a biddereligibility of the at least one bidder, by the first indicated number oftranches even when the withdrawal request is refused.
 8. The method ofclaim 1, wherein the method further comprises, retaining first, by thecomputer system, bids of a bidder having a lower named exit price, whenat least two bidders make withdrawal requests and name an exit price andthe withdrawal requests are refused.
 9. The method of claim 1, whereinthe method further comprises, when at least two bidders make withdrawalrequests and name an identical exit price and the withdrawal requestsare refused, determining, by the computer system, which tranches are tobe retained, wherein the decision comprises one of an earlier confirmedbid in the round of bidding and a decision made on a random, tranche bytranche basis.
 10. The method of claim 1, wherein the method furthercomprises, releasing, by the computer system, the at least one of therefused number of tranches retained for the at least one of theplurality of products, and enabling, by the computer system, the atleast one of the refused number of tranches retained for the at leastone of the plurality of products to be withdrawn during a firstsubsequent round during which a sufficient number of new bids areentered for the at least one of the plurality of products such that atotal number of tranches bid for that product for the first subsequentround is one of equal to and greater than the tranche target for thatproduct, and wherein the release of the retained bids is reported to theat least one bidder.
 11. The method of claim 1, further comprisingprocessing by the computer system the received bids comprising the atleast one electronic bids and the at least one manual bid when presentand determining whether the received bid comprises a minimum amount oftranches, whether the received bid is within the at least one bidder'sinitial eligibility, and whether the received bid is within apredetermined load cap.
 12. The method of claim 11, method furthercomprising determining, by the computer system, whether to proceed toanother round of the auction or complete the auction and award at leastone winning bidder responsive to the processing of the received bids.